Thank you for the very thoughtful questions. First it important to understand that in today’s new used car market the key is to not price every vehicle low, nor is it to price every vehicle high. Rather, it is to KNOW which vehicles must be priced low and which ones do not. The answer to this question lies in the knowledge in that vehicle’s supply, demand and price sensitivity in that market at that very moment.

Vehicles that have high demand and short supply can be priced at the top of the pack and still draw traffic, while those with high supply and low demand must be priced among the lowest. It is an incorrect assumption to think that my philosophy has every car priced among the lowest.

Now with the respect to your broader concern, if every dealer had my technology tomorrow the unfortunate reality is that many would not even flip on the switch, and many more would not use it correctly. It is only those dealers that understand the Velocity method of management and are willing to make necessary changes that will enjoy the competitive advantages of our approach. So, the practical answer to your question is that there is no need to worry.

It is, however, interesting to wonder what would happen if every dealer followed the system properly. In other words, what if there was perfect knowledge on everyone’s part in the used vehicle market? Would there be a race to the bottom and everyone would go out of business? The answer is no, and to be sure of this, we can look to other markets that are highly efficient and commodity like.

For example, consider the mercantile markets i.e. grain, cattle, beans, etc. In these highly efficient markets, there is always an equilibrium point at which a product will transact. When too many traders know that point, it forces the price down and that causes market participants to exit, in favor of more lucrative opportunities. When too many sellers exit, the transaction, or equilibrium price, rises. When it rises too high, it draws more market participants which pushes the equilibrium transaction point back down.

In the case of the automobile markets, when too many people know the retail market price for an 08 Kia Sorento, no one can make any money so some sellers exit the market in favor of other models that are less well-understood. The winners in all such markets are those that have superior knowledge, ability to make the fastest adjustments, and the most efficient operations that can maintain profitability at what will certainly be a tighter, less forgiving market. My mission, and the success of my clients, is based on helping them become the ones that have the most knowledge, greatest agility, and most efficient operations. Unfortunately, these will never be the characteristics of the masses but only the successful few. Again for this reason, no need for alarm but I appreciate the question and concern.

Let me play “Devils advocate” for a moment . I current hear this as the #1 challenge for most of the Dealers I serve . Let say they are all reading this post and just 50% impliment this new stratgy. Will this not create a whole new supply and demand issue on those units in their market ?

I am an advocate of your inventory philosphy and want to better understand . How can every dealer who employs Vauto and wants to sell more cars PROFITABLE , be the lowest priced unit in their market ? As more Dealers understand the days supply idea and adopt this as a buying stratgy, will this not drive the prices up on the hot low supply/high deamand units and shrinking profit margins ?

Respectfully ,

Tim Elliott