Last year was one of the most challenging on record for the pre-owned vehicle market. Despite a strong performance in 2021, many used car retailers faced high vehicle prices and wavering consumer demand. To discuss current market trends and give advice on what steps dealers should take in the coming months, Brian Kramer, the Executive Vice President at Cars.com, Frank Brothers, the Platform Director of Dealer Operations for Peter Boulware Toyota, and Dealer Principal Peter Boulware, join host Jim Fitzpatrick on Inside Automotive.
Wholesale prices have gone down significantly in the last five months, leaving many businesses strapped for cash. Some used car retailers assumed the comparatively successful market of 2021 would continue throughout 2022 and failed to make emergency plans, while others tried to keep business going as usual, holding onto hope it would pay off if the auto-industry recovered. Unfortunately for many, a normalization has yet to arrive, and many analysts agree that the industry is unlikely to ever be the same. Both Boulware and Kramer note that his dealership managed to avoid many of the financial struggles its competitors experienced by anticipating the changing tide of consumer interest, and changing its business model in time to accommodate the reduced demand.
Despite the complicated economy, Brothers notes that his company is seeking to bring back deals and promotions in order to encourage consumer demand. During the two years after the COVID pandemic, many preowned retailers abandoned the practice since every vehicle was almost guaranteed to make a profit, and buyers were left with little choice after automakers suspended production in the face of labor shortages, lock-downs and supply chain disruptions. However, given the recoveries to production and manufacturing, dealers will likely need to return to fundamental marketing strategies to make ends meet.
Many consumers also dislike the length of time it takes to get a quote on a vehicle. Americans have more and more commitments as the years go by, leaving them with little time to spend on shopping, even for something as important as a car. It has become more necessary than ever to make the buyer experience as user-friendly as possible, which is why online tools are a requirement, not an option. To improve customer retention, used car retailers will need to make their pricing transparent, and their communication fast.
Kramer adds that used car retailers should also seek to improve the trust and culture at their businesses. Workers who are motivated, engaged and supportive of a business’s goals are essential to bringing in customers, but many managers fail to develop a connection with their staff, or worse, jeopardize their team’s ability to work together by creating a poor work environment. Making sure the individuals responsible for the company’s success are treated with honesty and respect should be at the top of the list for any dealership’s priorities in 2023.
The fact remains that preowned retailers can no longer afford to follow the same strategies that worked ten years, five years or even one year ago. The industry is changing, and businesses will need to modify their models to accommodate the customers of today and the future.
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