Monthly Archives: November 2011

Solving Used Vehicle Supply Problems

It seems that nearly every dealer I talk to, when discussing the health of their business, the subject of tight vehicle supply comes up. Depending on the manufacturer, new vehicle supply has been a challenge with the earthquake in Japan, and recently with the floods in Thailand. You might argue that new vehicle supply is less directly under dealers’ control, however tight used vehicle supply generally runs across the board, and savvy dealers need to become creative to overcome these challenges. For the purpose of this discussion, I’m going to focus on overcoming tight used vehicle supply issues.
The old saying is, “They don’t manufacture used cars.” In essence, the only way to make a used car is to sell a new car. With the challenges in new vehicle sales and leasing in 2008 and 2009, the industry was not making very many used cars. Compound that with the Cash For Clunkers program scrapping 700,000, resulting in 2009 being the first year in decades where scrappage outpaced new vehicle registrations by 9%.
I would argue that if we are faced with tight used vehicle supply, you have two choices: 1) Find new sources of used vehicle supply. 2) Open up your selection set of used vehicles you are willing to stock.
So how do you find new sources of inventory? Many dealers have taken this problem “to the streets” by soliciting customers to bring in their used vehicles for sale to the dealership. Of course we’re always willing to make a trade, but how willing are we to outright purchase this vehicle? Many dealers have been successful with this approach, especially if they can find good, clean used vehicles that they have a history of moving quickly at reasonable grosses. I’ve also talked to dealers who will mine the FSBO ads, calling individuals who are selling their cars, in the hopes of purchasing at the right price. Dealers are also much more willing to travel to distant auctions instead of simply purchasing at their typical local auction. Dealers need to be creative and use whatever methods are at their disposal to secure the right used inventory for their customers.
Without a doubt, the most creative and advantageous method I’ve heard of for finding good, low-mileage vehicles is through mining your CRM and Service Department. Dealers have hundreds of customers coming in for service each month, many of whom either have positive equity in their vehicles, or are facing large repair bills and might prefer to purchase a new car instead. Both of these are opportunities for you to secure and used vehicle, and perhaps sell a new or used unit as well. In addition to keeping your eye on Service customers, how many customers in your CRM system are in a positive (or near positive) equity position on their vehicles? What if you could get a report from your CRM on which customers these are, and give them to your sales team to follow up with? There are systems out there that will automatically mine your CRM for customers in positive equity positions, which virtually translate into “Used Vehicle Manufacturing Software”! We have such a system, and there are other providers as well, either way it is a new and clever way to source vehicles in your market. Best of all, you’re not competing with your competitor for these deals, since the consumer is not actively shopping. You are able to approach them with a deal that sounds like “…can get you a brand-new car at the same payment (or less), and we’ll take your old car in trade…”, and the customer never shops the deal.
Now if you’re a CPO (Certified Pre-Owned) dealer, then your supply issues are worse yet! Since people are hanging on to used vehicles longer and longer, the ability to find clean, low-mileage vehicles that can be certified is really challenging. Again, mining your CRM to find these low-mileage vehicles that can qualify for Certification is a great approach.
OK, I said there were two approaches, the second approach is to open up your selection set, or what cars you might consider stocking at your store. Internet shopping has transformed the marketplace for dealers, and essentially opened the boundaries. No longer are you limited to shoppers that might only drive 15-20 miles to look at vehicles, now customers shop in a 100 mile radius or more. If they can find the vehicle they like, they are more than willing to travel. This means that dealers need to embrace the technology, and throw away their old beliefs on what vehicles they should stock. Dealers should think more broadly about “the market”. There are many great software solutions out there (we’ve got one too), that allow you to determine the best cars in the market, the cars with quickest turn, and the cars representing the highest potential grosses. Embrace the technology and use these systems, along with your experience with your store, to consider off-brand vehicles you may not have stocked in the past.
I hope some of these ideas will help you, if you have more good ideas on solving vehicle supply issues, please email me at George.nenni@dominionenterprises.com.

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