In a competitive market, it’s no surprise used vehicles represent one of the most dynamic and profitable areas of dealership operations. Yet, navigating this space is far from simple. There are so many factors involved and so many data points to consider.
First there’s sourcing inventory. Inventory your market actually wants – not just what’s available – has been one of the hardest parts these last few years.
Then there’s making an educated decision on what you’ll pay for that inventory, plus what it will cost to get it ready for sale, and what you’ll price it at.
Next comes reconditioning, making sure your newly acquired vehicle moves through the process quickly, because we all know time is money in the car business, all the while “hoping” no surprise repairs or damages are found.
Now for the merchandising… taking the perfect pictures, writing a description that makes the vehicle stand out from all the others on the internet, and identifying which aspects of the vehicle are most likely to make the customer bite.
And finally, the countless number of pricing updates. You can’t just set it and forget it. The used car market can change at a moment’s notice, and staying on top of these fluctuations is a key part to your profitability.
So, how do you get through all this with a “win” at the end? The secret to a profitable used vehicle strategy starts with the right data.
Identifying the Right Data
The more specific data you can dig into or filter by, the more accurate your strategy is going to be. Details like trim, features, drive train, mileage, and even color are hugely important and impact how quickly you’ll sell it and how much a customer will pay for it.
You should have the ability to use performance metrics based on how well a specific color performs in your market. A red vehicle might sell in 18 days compared to a black vehicle of the same model and trim. A base model might take twice as long to sell vs. one step up. Taking these nuances into account can ensure precise results that work at your store and for your market.
Managing and controlling your reconditioning costs is a complicated process, and it often lacks visibility across all teams involved. Having access to this type of data can help you improve transparency, save you money from unexpected costs, and speed up the entire process, shortening your time-to-line.
With the right data, you can:
- Drill down to the precise vehicles that will actually sell in your market and at your dealership.
- Leverage dynamic comp sets that are specific to your dealership’s strategy and weed out ghost vehicles for more accurate results.
- Provide complete visibility between all departments, getting vehicles on the line faster all while avoiding costly reconditioning mishaps.
- Get real-time pricing updates to stay ahead of fluctuations that could cost you money.
Incorporating the Right Data Into Your Strategy
From acquisition to recon to merchandising, you need a single, seamless process that infuses precise, accurate data into every step with ease and convenience.
During acquisition, when you’re searching auction sites or marketplace websites, you should be able to instantly see vehicle history, book values, and pricing recommendations right on the site instead of flipping back and forth between different sources.
You should be able to leverage accurate comp sets specific to your dealership and your market, excluding what you know doesn’t work, that are updated automatically based on your business rules.
During the appraisal or inspection process, you should be able to get immediate insights into the vehicle’s diagnostics that can aid in uncovering those unknown issues that might cost you more down the line.
The actual reconditioning process should be part of your overall used vehicle strategy – not separate. You should have complete insight into where the vehicle is, what’s happening with it, and when it will be done. Data and information should be accessible by both your used vehicle team and your recon team to improve transparency and communication.
When it comes to merchandising, real-time, automatic book updates with notifications ensure you stay on top of changing market conditions.
Upping Your Inventory Game
Artificial intelligence is the next frontier for many areas of dealership operation, including used vehicle management. What could this look like?
Let’s start with stocking and pricing. Based on all your data – market data, DMS data, historical inventory performance data –AI should sort through all of this and make educated recommendations for you, even going so far as to provide you a detailed explanation if needed. This allows your team to make informed decisions quickly, saving you time and improving your used vehicle strategy and profits.
When it comes to merchandising, AI can save you a tremendous amount of time while ensuring high quality listings. This could be creating vehicle images for you that have professional and consistent backgrounds and key feature overlays. Or generating unique vehicle descriptions in seconds that help your inventory stand out from similar models online.
The Used Car Forecast for 2025
2025 will be the year of the great operator. The dealership that sources well, buys right, recons quickly, and merchandises for market fit will win. The market is becoming more competitive, and here’s why:
- More late model cars will become available after shortages in the 2022 model year.
- The gap between new and used pricing, especially CPO, will shrink as new car incentives spike.
- Prices are stabilizing, meaning those homeruns are going to be harder to come by.
- Borrowing costs will remain relatively high keeping monthly payments up for buyers.
With these factors, and whatever else the year may bring, controlling the margin of error in your used vehicle strategy is going to be what sets your inventory apart from the other guys, pushing you ahead of the pack. The right data, paired with a single, seamless process, and a little help from AI could make a world of difference.