4 tips to better manage the pre-owned department of your dealership

It’s stating the obvious, but the car business doesn’t work in a vacuum. This is especially the situation when it comes to the second-hand side of things. Record new car prices Y rising interest rates they’re driving customers to used deals as shiny new rides become less affordable.

All this coincides with a fall in the value of second-hand vehicles. The Manheim Used Car Price Index, which tracks wholesale numbers, fell almost 13% since the beginning of the year. The numbers aren’t as dramatic on the retail front, but average transaction prices are declining, according to the CarGurus Used Car Index. Online market data shows that the typical used vehicle now sells for $30,361 (at the time of this writing), down from the July record of $30,844. At the beginning of the year, the figure was $30,524.

So now is the ideal time for dealers to re-evaluate their used vehicle department operations. An analysis of best practices can improve the bottom line and help prepare for any market changes that may come in the future.

1. Inventory

Keeping used car operations in top shape is centered around inventory, and every coin has two sides. In this case, it is quantity and quality. Of course, quantity is a delicate balance that requires constant evaluation. There must be enough inventory to be attractive to customers, while too many vehicles on the lot are a drag on profitability. This is best handled by constant analysis. If you can’t remember the last time this was done, you know where to start.

In addition to having the right amount of inventory, you offer the right vehicles for your customers. A lot full of trucks won’t do much good if customers need more fuel-efficient cars. Therefore, ongoing inventory analysis must include a look at what is available versus what people want.

2. Prices

Declines in wholesale used car values ​​and flat numbers at the retail end have created a “cushion of forgiveness.” However, recent downward trends in the average transaction price mean dealers need to be more receptive. The retail drop has been modest so far. Still, it’s a safe bet that the ongoing rise in consumer borrowing costs will add more pressure to used-car retail sales.

Just as inventory requires constant checking, so should the price offered by the used car department. Because if you’re not adjusting prices to reflect market conditions, chances are a competitor is.

3. Redemption process

Like it or not, CarMax, Carvana and others have redefined handling trades. If the way you handle appraisals hasn’t changed in the last decade, your business is behind the times. Online services can help you enter the 21st century and at least create exchange opportunities. At the same time, this is an excellent opportunity to standardize the way you handle things in the store or on the phone.

  • Use an evaluation form: Submit a form to each appraisal client (or have it available as a web download, email, or text attachment). The document must be completely filled out, signed and returned by the client. External customers can take a photo and return it via email or text message. You’ll also want the remote client to attach photos (describe what you’re looking for in the form).
  • Check the Document: As practical, review the document with the customer to confirm details and fill in the blanks. Take this opportunity to explain the process, including how you’ll view the vehicle’s history and current market conditions. Also explain that appraisals are subject to a final on-site inspection and other requirements.
  • Explain the appraisal: When you’re ready, review the appraisal with the client. Any problems with the vehicle must be detailed in writing on the appraisal form. This will help justify the offer and make customers realize that your cars aren’t perfect.
  • Be transparent: Above all, be honest with the customer about how your dealership handles appraisals and exchanges. Not only will this decrease anxiety, but it will also help build confidence. Part of this involves walking around the car (either during the initial contact or in the final stages) with the customer to explain any problems or imperfections.

4. Vehicle details

In many cases, a potential used vehicle customer will first encounter your dealer through an individual vehicle description (such as through an online marketplace or aggregator). Therefore, the content of this list is essential. At a minimum, these details should include:

  • The basics (price, mileage, powertrain, exterior color, interior/upholstery color)
  • All standard and optional features
  • Extensive photos (inside and out)
  • CARFAX report
  • Remarkable characteristics (no accidents, sole owner, etc.)

If a listing doesn’t have this information, the car is at a competitive disadvantage compared to what’s out there. Plus, the minimum isn’t good enough anymore, thanks to well-organized online dealers and smart brick-and-mortar competitors.

Consider updating each vehicle listing with a paragraph summarizing its highlights and why someone should buy this car. Next, add a section or a few bullet points that emphasize why the customer should buy from your dealer. Stick to the three main points to keep things simple. This information can be anything from free oil changes to extensive inventory; you must know what brings them to the door.

Also, consider adding a short video showing the car starting. Include a view behind the wheel and a look under the hood (and listen). Such a simple effort will instill confidence in the buyer in the vehicle and in their dealer.

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