How car dealers can better source used car inventory in 2022

Dealerships faced major headwinds in 2021 as an anticipated shortage of critical vehicle components like semiconductor chips put the brakes on new car production. This challenged car dealers to turn their attention toward used cars and building their inventories in a hyper-competitive marketplace required creativity.

New-vehicle sales in 2021 neared 14.9 million units, according to Kelley Blue Book data, which is well below the five-year average of 17.3 million the industry saw from 2015-2019. Despite limited new-car inventory, the demand for used cars skyrocketed in December, soaring by 42% compared to the same time last year, with the average price hitting $27,500. 

Many car dealers struggled to keep pace with the used car boom. With fewer new cars in production, car dealers received fewer trade-in vehicles. While at the same time, demand for used vehicles went up.

As continued chip shortages dash hopes of new automotive production returning to normal levels anytime soon, car dealers will need to rethink how to source adequate used car inventory for their customers. To remain competitive, car dealers will need to be resourceful.

4 ways car dealers can meet demand in 2022

The Manheim Used Vehicle Index, which tracks the amount used car dealers pay for automobiles at auction, shows a slight decline (1.1%) in used vehicle wholesale prices in December from November. But Manheim also forecasts used vehicle values will increase into the spring. When car dealers pay more for used cars, they pass the additional costs onto buyers. Although the radical pricing surge may have priced some buyers out of the market, when consumers need a car, they buy what’s currently in stock – despite prices. Owning a car is still necessary for most Americans.

Here are a handful of ways dealerships can set themselves up for success in the new year, based on observations and data we’ve collected at Montway.

1. Expand your geographic area when buying cars

The lack of used car inventory has motivated car dealers to expand their purchasing areas, buying one car at a time from anywhere in the country to fulfill their needs. In the past, car dealers might have bought multiple units at one local auction but now, they might buy one from Florida, another from New York, and then another in Michigan. This means dealers are placing more orders for single-unit moves. Until new vehicle production gets back on track, and to help avoid having low or no available inventory, dealers need to be willing to expand their geographic reach.

2. Forge transportation partnerships with companies that have a national footprint

If you’re going to scan the entire country for used vehicles, you need a reliable partner who can bring the cars to you. Not just that — they need to move one car at a time just as quickly as they move a full load of cars. Having a relationship with larger third-party logistics (3PL) transportation companies will only increase a dealer’s buying range and the speed with which they will have a car on the lot to sell. Additionally, you should choose to partner with a company with extended hours. When you’re shipping across time zones, increased customer service availability will be critical.

3. Explore the ever-growing list of new online platforms

The year 2021 saw a shift in how and where car dealers bought used cars. Montway data showed a significant increase in dealers buying online, whether from traditional auctions via live stream options, online auctions, or dealer trading platforms. If you are still relying on brick-and-mortar auctioning and shopping, you’re missing a huge piece of the pie. Dip a toe into the hundreds of thousands of used, wholesale and repairable vehicles available on auction sites. The search filters make it easy to find what you’re looking for and select from a range of vehicles that cater to different types of customers.

4. Increase your purchases from private owners and be accommodating when you can

At Montway, we’ve found car dealers are purchasing lease returns or buying from private owners more frequently than in the past. But with a lack of new car options, owners aren’t always ready to part with their car. We’ve even seen some car dealers go the extra mile, offering to pick up trade-ins in consumer driveways or push their offer level to the max. If you decide to pick up trade-ins, you’ll want to partner with a vehicle transportation company with national reach and the ability to pick up single cars at a reasonable price.

With no clear, definitive ending to the pandemic in sight, auto dealers need to take major steps in 2022 to make sure they remain competitive. Foresight, flexibility, and resourcefulness will ensure you keep your customers happy and your business thriving.

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