The Key to Stocking Your Used Car Lot

March 17, 2009

I think it is safe to say that if you checked most dealers’ used car inventories, over 70% of their vehicles match their franchise brand. Nevertheless, I am going to make the bold assertion that in the vast majority of cases, no more than 50% of a dealer’s used inventory should represent their franchise brand. A dealer absolutely needs to have some brand vehicles because potential buyers may still show up looking for these vehicles. However, I don’t believe this is reason enough to allow these vehicles to represent the majority of your used inventory.

The basis for my assertion begins with the recognition that no brand holds the monopoly on “hot used cars” in the market. In addition, the Internet makes it extremely efficient for buyers to find used vehicles that are located anywhere − not just at their new car franchise brand locations.

For example, if you are a Ford dealer that stocks a hot vehicle like a Subaru Impreza, prior to the Internet, no shopper would think to stop at your lot to find the Impreza. But as we have come to understand, today’s buyers shop differently. They are more likely to go to the Internet, type in their zip code and the words Subaru Impreza than drive to the local Subaru dealer. And, it’s important to acknowledge that the Internet’s search engines have no regard for dealership franchise brand when returning search results. In other words, the Subaru Impreza on the Ford dealer’s lot will show up right along side the other Subaru Impreza’s – irrespective if they are on a Subaru dealer’s lot.

One reason that had prevented dealers from stocking non-franchise used vehicles in the past is what I call the “gotcha” experience. We’ve all had the misfortune of buying a vehicle, not of our brand, that we thought was hot. Once we showed the vehicle to a few customers, we came to the realization that because we didn’t really understand the nuances of the brand, our vehicle lacked a critical attribute, such as a certain trim or a particular piece of equipment, like navigation or rear entertainment, that was a deal breaker. “Gotcha”. However, the “gotcha” experience is no longer a good reason to work only in the zone of your franchise brand’s comfort and familiarity.

Today there is technology that will identify the hottest selling vehicles in your market in the past 45 days. And, unlike products that report registrations after they’ve been through the state DMV, this new technology identifies the supply and retail demand of every vehicle in every market. Moreover, this used car pricing technology identifies the hottest vehicles down to the level of year, make, model, trim, and equipment configuration that virtually eliminates the “gotcha” risk.

So, if your franchise brand doesn’t hold the monopoly on the hot used cars in your market, the Internet makes it entirely efficient for you to find a buyer for that off brand car as well as for that buyer to find you. And if technology allows you to identify the hot vehicles at a level of specificity to reduce the “gotcha” risk, shouldn’t you agree to stock other fast moving vehicles?

I say the resounding answer is that you must. In fact, I would suggest that not doing so keeps your dealership locked to the fortune or misfortune of your new car franchise brand. Moreover, you are ignoring the benefit that technology has created. Every dealer would love to have the ability to order and stock the hottest new models from each manufacturer, but this is not possible. But, you can stock any used vehicle that you want and this is absolutely under your control, you should capitalize on the opportunity.

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