How to keep used car inventory clean once seasonal trends start to affect the industry

Welcome to this week’s episode of Used Cars Weekly, the original CBT News show dedicated to bringing car dealers best practices and tips for the used car department, in-depth dealer interviews, hands-on dealership strategies, as well as vendor analysis. Today, host Jasen Rice, founder of Lotpop, shares predictions for the used car market for the rest of the year.

Rice begins the conversation by discussing common trends that he’s seen over the last seven years when it comes to seasonal adjustments.

Tracking shopper activity

Rice says, typically what happens from January through March, is January starts with low shopper activity, then by the middle of March activity peaks. Shopper activity drops off going from April to June, then an uptick happens between July and August. Rice believes the increase is attributed to new car advertisements and summer sales events. This year’s summer sales events might not happen due to inventory issues. Between September and December, is usually is the lowest shopper activity for used cars.

Wholesale

Rice says, whatever cars you buy starting July 1, will be 60 days old, if they’re not sold by September. By October and November engagement on used car trends drops off and the focus turns to new cars. If that happens, Rice says, wholesale should drop. With many dealerships still overpaying for used cars due to the new car inventory shortage, Rice believes that’s when margin compression happens.

Rice continues to say, car rentals are also helping wholesale because renters know they can make their money back on fees. Wholesale will stay high as vacation travel picks up and the new car shortage continues. Remember, that doesn’t mean retail will also stay high. He says dealerships are paying MSRP or more and asking customers to pay sticker prices for a used car. As shopper activity drops, the market becomes more of a need market rather than a want market. Rice says more customers might choose to wait and see what new car deals and incentives could be forthcoming. Rice predicts, wholesale will stay high through August, and possibly September, but will drop as soon as vacation season ends.

Rice wraps the conversation by stating, you might have to pay up for cars. You may not want to pay up or hang onto them but that means the cars are aging on your lot. He says, he’d rather miss the bubble than be stuck in it when it pops. Rice says, keep your inventory clean, take some skinny deals, and be safe. Variables like the rubber shortage or transportation issues will completely change this outlook.

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