Alternative Strategies for Stock

The used car market is starting to show signs of cooling, with consumer demand easing. However, the shortage of new car availability continues to cause unprecedented pressure on used stocks. In this article, we look at the state of the used car market and ask how dealers can try to maintain and grow their stock portfolios.

Volumes down, margins up

The ‘post-COVID’ consumer spike in demand for cars has started to show signs of softening, and how this continues plays out in the coming months as belts are tightened due to the cost-of-living crisis remains to be seen.

Business and fleet demand for new vehicles remains very high, not least because many company car drivers are already long overdue for a replacement vehicle. Car manufacturers’ inclination to push available supply toward the more profitable retail market has not eased this issue for fleet and transport managers.

All this adds to continuing heat in the used car market, a double-edged sword for those in the trade. The strong used values is an obvious bonus for those with access to stock, but sourcing vehicles has never been more of a challenge.

Used car dealers have been employing a range of strategies to overcome supply shortages; some completely reinventing their acquisition model to increase turnover, enhance margins, or, ideally, both. We’ll look at some of these strategies and the increasing role that technology is playing.

Greater flexibility in vehicle acquisition

Almost all dealers have their preferred manufacturers and vehicle types, often from many years of experience and a reputation for specialism in those vehicles. In recent times, dealers of all sizes have had to take a more pragmatic view of vehicle stocking to fill their forecourts and online marketplaces.

This often means stepping outside of the vehicle brands that the dealer is most comfortable with and considering others that would appeal to their customers. In addition, many dealers have begun assessing the value of slightly older, or higher mileage, vehicles that are becoming increasingly desirable in the current market.

For this to work, dealers must have good insight into the needs and wants of their customers and how a broader range of vehicles could meet these without affecting their reputation.

handing over car keys at car dealership

Encouraging part-exchanges

Where a customer is looking to dispose of a vehicle that’s likely to provide quick stock-turn and a healthy margin, encouraging a part-exchange can be a simple way to maintain the portfolio. This may mean being more flexible in terms of either the value quoted for the vehicle being part-exchanged or the margin being made on the sale, but both could be worthwhile, depending on the saleability of the vehicle taken into stock.

In a similar way, taking a more flexible view of how to dispose of vehicles taken in through part-exchange might also be beneficial. Choosing to dispose of a greater proportion of part-exchange vehicles through retail channels rather than wholesale could be a simple way to boost the selection of vehicles on the forecourt.

Meeting niche demands

For the savvy dealer with a good understanding of the used market, there may be some highly profitable niche markets worth considering. These could be unusual vehicles, or cars with unique specifications, that command high prices if marketed in the right way. Sourcing these vehicles on demand for valued customers is another option. 

Obtaining these niche vehicles isn’t necessarily straightforward, but there are specialist wholesale and retail marketplaces, as well as the private-seller market, that can be accessed.

Consider used electric vehicles

The used EV market is currently very hot, with high demand and equally healthy margins. Selling used EVs requires a degree of specialist knowledge, particularly in discussing anticipated maintenance costs and comparing lifetime running costs with traditional vehicles.

Dealers may also be expected to provide recommendations for home-chargepoint installers and advice on selecting the best rapid charge network when away from home.

Expanding the wholesale dealer network

Perhaps the most efficient way to source additional stock is to broaden the network of dealers and other volume sources, such as leasing companies and large fleets, that you work with. Building links with trusted fellow traders can take time and effort, but new online platforms can help short-cut this.

Using technology to facilitate stock sourcing

During the pandemic, strides were made in using technology to bring buyers and retailers together so that transactions could continue without the need for face-to-face contact.

But, until recently, the same trading environments have not existed for the wholesale side of the used car industry.

Instead, dealers have had to rely on tried and trusted stock sources such as trade-ins, which are difficult to control and predict, and auctions, which take time and effort.

Real-time - 24/7 wholesale trading

The new breed of online wholesale trading platform works by connecting dealers and other wholesale traders instantly, allowing a live view of all vehicles available, either in your selected network or across the entire marketplace. By setting filters, dealers can home in on the specific vehicles they are interested in buying and create alerts to notify them of new stock that meets their criteria.

This type of functionality can transform the search for, and purchase of, desirable stock, making dealers more agile and better equipped to meet rapidly shifting customer demands.

Regardless of market conditions, the vehicle acquisition process for used car dealers is shifting to keep pace with the retail world. It’s now a matter of choosing the right digital solution for your business based on the advantages it can deliver in terms of access to the right vehicles, flexibility, and convenience.

Discover more about how MOTOM’s new vehicle remarketing app can help to enhance your dealership’s stock inventory and get the latest used vehicle stock delivered directly to your phone.

July 5, 2022

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