The nice folks over at the The CarConnection.com wrote a nice piece about dealers and their ongoing pricing issues…
vAuto Helping Dealers Weave Straw Into Gold
On any particular moment, U.S. dealers have about $96 million worth of used cars, trucks and crossovers sitting on their lots. And most of those vehicles will sit there, day after day, waiting for buyers that may never come.
They may be the right cars, in the right place, at the right time. But if they’re priced too high, they’re simply going to sit there, running up inventory costs for dealers already strained by the current economic downturn.
That was the situation at Paragon Honda, in Woodside, NY, where the typical used car might sit around for a year before finding a buyer – and only then, says the retailer’s marketing director, Ashley Antonio, through some whopping price cuts. But today, the situation at Paragon is quite different. In 2007, it became the number one dealer in the country for Honda’s certified used vehicle program, outselling the number two dealer by more than 45 percent.
What happened? Antonio credits an online service, called Live Market View, that gives dealers a real-time look at what’s happening in the used car market, both locally and across the country. Type in the details when a car comes in as a trade-in, and you discover what it’s worth and what it’s likely to go for on resale. More importantly, Live Market View shows what other dealers are demanding for the same car…
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In my experience the biggest mistake a dealer makes in the pre-owned business has to do with inventory turn. It makes no different if your turn is within specs IF all you are doing is turning 80% of your inventory while 20% sits waiting for Mr. and Mrs. Oblivious to bail you out. You still have dead inventory that is’t working for you while you stubbornly try to make the numbers on the financial statement come true.
I find many dealers out there are insanely stubborn about inventory turn. They refuse to take the hit on paper they have already taken in the real world. I point out that the “hit” has already been taken and all that’s happening
now is everyone is in denial about the financial statement. I think some of this is based on the
fact that dealers tend to hold themselves hostage with their own pay plans. They feel if they
write down inventory they have already paid commission on they will have to pay commission
all over again. Plus, they don’t want to show a loss to their bankers.
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