Question from Bill Green of Automotive Avenues about what types of cars to stock

March 23, 2010

I received the following question from good friend and Velocity dealer Bill Green at Automotive Avenues.  My response is below.

D07_sonata_14_(400x300)ale, I recently received a Scarcity Index report from AutoTrader.  I took a Hyundai Sonata from the AutoTrader list and looked at the market day’s supply for that vehicle on vAuto.  It shows a very low scarcity so in essence is it just the opposite for the same vehicle between vAuto and AutoTrader?  I realize I do not know the year on the Hyundai Sonata on the AT list. I am just trying to create a little velocity, and needed some expert input.


Bill, first of all, let me commend you for doing something that most dealers have not yet figured out, that is to think about stocking their lot with the types of vehicles that consumers are actually looking for in the market.  What a concept! 

Over the past 6 months, I’ve done extensive research with AutoTrader for the purpose of determining the extent to which market day’s supply and scarcity correlate.

The first problem, as you properly noted is the inability to line up the same year/make/model/trim and major configuration packages.  Unfortunately, at this time AutoTrader and vAuto do not reference the same things with the same names.  In addition, generally AutoTrader is not able to get as specific on vehicle details as vAuto.  These data issues prevent us from performing a more accurate analysis.

Subject to these differences however, we found much overlap between low market day’s supply and scarcity, but not complete.  I think that both metrics attempt to answer the same question, and that is how desirable is a vehicle in the market.  The scarcity index is more upstream and the market day’s supply more downstream.  In fact, I think that they’re both very valuable.   

The work that I have done on this subject however, has demonstrated that small differences like trim, engine and transmission often have very significant impact on a vehicle’s desirability.  As a vAuto user yourself, you can find these types of differences on a regular basis.  To this end, I think that it’s very important to drill down as specific as possible for stocking purposes, however not for pricing.  The problem with being very specific on competitive sets for pricing is that customers cannot often compare vehicles at a detailed level.  In my opinion, it’s better to error on the general side than the specific side when pricing, and the opposite for stocking.  Does this make sense to you?

Thanks for your attention to this important subject.