There are several ways to find used cars to buy for your dealership and each one of them has advantages and disadvantages with different consideration sets regarding a volume or profit strategy. Let’s discuss a few of them here.
1. Auctions: Attend local auctions that specialize in used cars. This is a great way to get a variety of cars at wholesale prices. The keyword here is the word attend. Having somebody on the ground who can inspect your vehicle with the age of inventory of today’s supply of used vehicles is critical. It doesn’t have to be an employee. I know many dealers who have resources at each auction they buy from that do this for them for a small fee. The headache and loss they can save you when buying out-of-market is immeasurable.
2. Trade-Ins: Offer customers who are purchasing new cars ACV, actual cash value, to trade in their old vehicles. Remember, you are not paying an auction buy fee for these cars and in most cases, there isn’t any logistics cost to this acquisition. Even better, you can usually recondition these a lot cheaper and sell these cars at your dealership for more profit. The key here is not to accept NO as an answer. Everyone has a trade-in or had a trade. Work to understand your customer’s current situation to help you increase your look-to-book. Rem
ember though, with any measure its garbage in is garbage out. If your look-to-book is high, over 60%, you may not be getting all the looks actually captured. Inspect what you expect.
3. Online Marketplaces: Check out online marketplaces like Craigslist, AutoTrader, Cars, and CarGurus to find used cars for sale in your area. This is a unique area of opportunity for dealers to find the additional inventory needed to fill their buy plan funnel. Each of these sites has its own trade-in marketplaces with different names but similar functionalities. They all allow you to reach out to consumers directly and acquire their vehicles. These can be some of the most profitable vehicles in the market and because of that, these tools are some of the most expensive. However, the ROI usually plays out if the dealership process is on point.
4. Classifieds: Check the local classifieds in newspapers and online for people selling their used cars. This is one of my favorites. Incentivize your entire staff the same amount of money that you would pay at auction,$400 to $700, to bring in any vehicle off the street that fits the dealership’s inventory buy-plan if you buy it. The low-hanging fruit is gone so creative tactics like this have proven to be very helpful. Just like trade-ins, you are not paying an auction buy fee for these cars and in most cases, there isn’t any logistics cost to this acquisition. Also like any direct-from-consumer vehicle, you can usually recondition these a lot cheaper and sell these cars at your dealership for more profit.
5. Direct Buy: Consider reaching out to individual car owners directly, through advertisements, or social media posts, to buy their used cars. This is another one of my favorite activities for acquisition. “Conquest Prospecting” like this is a way to bring new customers to your dealership and make raving fans of someone else’s loyal customers. Don’t neglect this one and like the others listed here make sure to be transparent and start at ACV when giving a value for their vehicle.
6. Your Service Lanes: Why not reach out to every customer in your service lane and offer an actual cash value of the vehicle they’re getting serviced today, even if their interest level is low? With the right talk track your capture rate should be in the high 70% and then the purchase percentage of that should be somewhere in the high 30% range. Out of 100 service appointments, you could acquire an additional 21 vehicles from a highly profitable source. That would be a big boost to your weekly buy plan keeping you on track to hit your sales rate goals while growing the front end as well.
7. DMS/CRM Mining: This is another smart method to engage your customers by using your internal resources in determining age, equity, and payment opportunities. The goal is to get them out of their current vehicle and put them into another vehicle in your dealership while acquiring that inventory at the same time. There are many companies out there that can help you market on social media, e-mail, or direct mail to these vehicle owners. These are also very profitable vehicles to acquire and sell.
8. Car Rental Companies: Consider purchasing used cars from car rental companies when they update their fleets. This one could be tough right now because car rental companies are holding on to their inventory longer. However, with the new car inventory and sales up, they will be looking for newer cars with lower miles and begin to sell off their higher age higher mileage inventory this year. These older cars are very attractive pieces in the market today considering the tough economic landscape.
In Summary: The bottom line, in any economy, is that missing your buy plan will negatively impact your sales volume and your profit potential in a big way. However, so will acquiring vehicles on autopilot or without a thought-out retail strategy. Data-driven “Calculated Courage” is the best approach in any market and adopting the most profitable acquisition strategies will only help if you inspect what you expect. That starts with working your inventory management systems to determine the buy plan for your market and your nameplate. Second, in today’s aging used VIO market, it is critical to inspect each vehicle thoroughly to ensure that they are in good condition and meet your dealership’s standards. One of the best ways to ensure this is happening is to keep track of your appraised-versus-actual cost of recon. This will give you a lens into areas of opportunity to educate your buyers/appraisers but also hold them accountable to achieve the best numbers possible upfront. In this economy that is imperative. If you do that, any inventory source can be profitable.
Bottom Line: None of this is hard but it isn’t simple either. A surgical approach is a must in today’s market to win long-term. We are not in pandemic times any longer and the behaviors that brought success in 2020 into late 2022 will not cut it today. Buying and selling used inventory for a profit is the secret sauce of the Automotive Advisor Team and where our clients have the most success. Reach out to us for one-on-one discussions around their Used Car Buy-Sell-Profit Program.
The Automotive Advisor Team