We hear from a lot of dealers here at CARFAX. In a recent episode of the Just the Fax podcast, hosts Bob Grill and DJ Sherwood discuss the effect of today’s unique market and some dealer strategies around pricing, best practices when acquiring inventory, and some common mistakes to watch out for. In this inventory-starved market, it’s really clear how wholesale pricing affects retail pricing, and the resulting trickle down that impacts other areas of strategy. Here are a few highlights of the discussion:
Pricing: Short-Term Gain vs Long-Term Business Plan
Dealers are telling CARFAX that they’re evaluating their own behaviors right now. Short-term benefits have some dealers marking up new cars past MSRP, sometimes as high as 20% over sticker. Others are thinking about the long-term impact that will have on their customers. With new car prices that high, consumers want to feel like they’re getting more than the average on their trade-in, for example. And that impacts your acquisitions strategy.
Of course, it’s understandable to make hay while the sun shines, but can the market bear those markups? Maybe – but considering the repercussions is probably a good idea for the long-term success of your dealership. One key point is the possibility of alienating the customer who may have bought three or four more cars from you and used your service department, too. In that scenario, dealers are being mindful of short-term gains vs. a long-term loss.
Cultivating Service Customers
A lot of dealers have put effort and resources into keeping their service customers happy. So, when trying to acquire inventory through the service department dealers are being careful. They have realized that they need to avoid alienating these customers, even while approaching them for the most valuable inventory available.
A car that was bought new and serviced by your dealership could be worth more than the average car. That customer has been trusting your dealership to ensure that the car would be in optimal condition and would last. Dealers are evaluating how they approach these customers to ensure they don’t erode the trust that has brought customers to the dealership and service department in the first place. Some dealers are approaching these customers with an “offensive play” approach, designed to offer that customer an opportunity without losing their trust.
Slow Down, Catch Your Breath, Use Your Tools
When it comes to winning inventory in this market, dealers are stressing the importance of slowing down and making sure to maximize the opportunities. Sometimes things move so quickly in the rush to get cars on the lot that dealers either buy as many cars as they can without focusing on their real value, or view them all as the same, which can make them too conservative, particularly when dealing with the best cars and the best customers.
When buying from the public on the street, dealers say that showing empathy, and letting them express why they’re selling to you is important. There are some great tools out there that can help explain how you’re trying to give them all the money for their car. Trusted third-party tools like Vehicle History Reports from CARFAX Advantage, help you show your seller why you’re at a particular price, while building trust by being transparent with your customer.
Do Your Homework at Auctions
Auctions have become highly competitive, and often involve onsite as well as online buyers. To compete, dealers need to do their homework. That involves looking at the inventory runs ahead of time and doing due diligence. Understanding what is optimal for your dealership and market, what your best bid is, and then putting that in a plan is important. Successful bidders have the confidence to know how they’re going to bid and then stick to that plan.
Want the rest of the details on acquisition and pricing in today’s market? Listen to the full conversation between Bob and DJ on Just the Fax.
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