Now is a Good Time for Independent Vehicle Dealers.
This is an unprecedented time in the auto industry for vehicle dealers. Where the popularity of used car purchases have soared to a new high, that companies like Lithia, a prominent automotive retailer, is pouring $54 million into online used-car buying.
Why is this happening?
According to Atlanta based auction firm Manheim and Reuters, by the end of 2019, an estimated 12 million low-mileage vehicles are coming off leases inked during a 2014-2016 spurt in new auto sales. This is helping independent vehicle dealers around the country have more access to a high variety of quality vehicles. In turn, these dealers can turn around and offer this deluge of new inventory to an eager audience.
It also doesn’t hurt that used-vehicle prices at auction fell about 3% last year, according to Carmel, Indiana-based KAR Auction Services Inc. (KAR.N).
Independent dealers have a diverse group of buyers, from those looking to purchase a Bentley, to those buying a Honda. What they all have in common though, is that they all want a good deal!
Now, a good deal can mean different things to different people.
A common denominator that they share, is beating depreciation. When buying a brand new vehicle, as soon as the buyer leaves the dealer’s lot, that vehicle usually has a depreciation of 20-30%. This can be a huge deterrent to many buyers. Especially those buying high ticket items.
Understanding buyer behavior and having the selection to meet that behavior is a big advantage right now. Having this kind of variety also means that there is more competition between dealers, and that can only help spur shoppers to buy.
Purchasing a new vehicle has gotten to be very expensive. That’s why you’ll see all those great lease deals which are subsidized by the manufacturer.
Great deal leases also keep people coming back for a new car.
This actually is very good for the dealer/manufacturer, because it promotes residual income (or at least a reliable opportunity for such). Yet, many people either can’t afford to participate in that kind of practice, or choose not to do so for other reasons.
That makes used vehicles a great avenue for shoppers to find their next car, truck, RV, SUV, boat, ATV, or motorcycle.
Ultimately, this is great news for independent vehicle dealers. All the variables are adding up to a great increase in sales and profit. However, this also means that they have to step up their game. Whether that entails hiring more people or enhancing their advertising. Perhaps it might mean making their lot a more engaging venue to buy a vehicle. It will be important for dealers to separate themselves from their competition.
The questions all dealers will have to answer is:
Why should a shopper buy from me?
When it comes down to brass tacks, dealer’s need to be able to lay down a good deal. Larger dealers shouldn’t be lax in this, as smaller lots are in a lot better position to compete with their larger counterparts.
Dealers should not take this trend for granted, but strike while the iron is hot. If a dealer should find themselves running into a roadblock, then they need to begin thinking outside the box. Pre-owned vehicle dealers should find ways, right now, to see that this trend lasts as long as possible.