It’s “a topsy-turvy market” with “so many moving parts,” says Charlie Chesbrough, Cox Automotive’s senior economist.
State of Pre-Owned
As we finish up month 1 of Q3-- in arguably the most chaotic and unsteady year of many of our lives-- automotive continues to push forward and look for ways to meet consumer demand. And, the population is wanting personal vehicles more than ever before. With fears of another Covid resurgence (Cox Automotive Study), and higher distrust in public transportation, many who would have used ride-share or public transportation have transitioned to a personal vehicle. As this demand continues, though, we have not regained pre-Covid numbers at dealerships, and inventory is at the lowest it has been in a while.
In the early parts of May and into June, as consumers started purchasing again, we saw a dramatic increase in new vehicle sales. Factory incentives paired with stimulus money assisted many customers with their pent-up desire to buy a vehicle. Most of the incentives have now expired, and customers have switched their search focus from new to pre-owned.
We saw a similar shift in demand from new to used in 2008-09, and this trend is consistent with uncertain economic times.
Tyson Jominy, J.D. Power’s vice president-data and analytics stated that “Less-compelling incentives on new vehicles will further bolster demand for used vehicles, and a significant number of households who would have purchased a new vehicle are switching to the used market due to affordability concerns.”
Here’s the problem. Pre-owned vehicles are harder than ever to find. With so many auctions that are just re-opening at a smaller scale, lease turn-ins pushed out, and trade-ins not as frequent, it has left dealers scrambling to get pre-owned vehicles at a decent wholesale price.
"We are seeing the market struggle to keep up the pace of recovery we enjoyed in May and June," Smoke said. "Inventory is becoming more of a problem in both the new and the used market, and we can't ignore the downward drift in consumer sentiment that's been happening across the country as we've seen widespread increases in the COVID-19 cases. But we can celebrate that we still have markets that are enjoying year-over-year increases in vehicle sales" stated Jonathan Smoke, Cox's chief economist in a June Automotive News interview.
Dealers know where the demand is, but how do you get the inventory you need? Below are three ideas that may help secure the valuable pre-owned inventory you need to continue the upward trend.
Trade-Ins are More Important Than Ever
At the dealership level, we need to maximize our sales and service lane to get the trade-ins we need. Auction prices are higher than they have been (simple supply and demand theory) and the sheer ability to get to a physical auction has been difficult.
Equity mining in your service lane is a fantastic opportunity to work with service customers and show them the value of their trade-in. We need to let customers know we are looking for pre-owned vehicles and that their specific vehicle is exactly what we need. The messaging will instill confidence in the consumer that they are getting a good deal, and will get you the vehicles you need. The added bonus is that you can get the customer into a new vehicle and continue the relationship.
Basic social media advertising can also be your friend when looking for trade-ins. The messaging is not new, but making sure that you are actively posting and sending out paid advertisements on social media highlighting your need for trade-ins will increase activity and bring new vehicles on your lot.
Market Your Dealership’s Covid Process
A Cox Automotive survey released last week found that 70 percent of consumers are extremely or very concerned about the virus. More than 40 percent of consumers who plan to delay their purchase said it is a "scary" time to make a vehicle purchase.
How are you reassuring customers that your dealership has taken enhanced precautions to ensure the safety of their customers? You cannot get a chance at a trade-in if you cannot get the customer to interact with you.
Here are some simple ways to get out your message and reassure your customers:
- Create a simple video that highlights your sanitization methods in both sales and service
- Share these videos on your website, Facebook, Instagram and IGTV, and on YouTube
- If you have “At Home” services for sales and service, highlight these prominently on your website, on social media, and any advertising/messaging that is going on.
- The goal is NOT to “get the customer in.” The goal is to get the customer to interact with you in the manner in which they feel safe. Are you prepared for that?
Customers want to be reassured that they CAN buy a vehicle right now, and these are simple ways to do that.
Nurture your existing customer relationships
This is the most important element of obtaining pre-owned vehicles. You need to have a process in place to reach out to, nurture and develop, and assist your customers so that you have the opportunity to work with them.
I have spoken with many dealerships who have furloughed the majority of their BDC and are having a difficult time rebuilding. The sales and service BDC is an integral part of communicating with your customers. They are the face and voice of your dealership, and are needed to make the volume of calls necessary to set enough appointments to get enough customers in…. You know the process.
If you do not have a BDC, or do not have a talented team of automotive experts calling your customers in an equity position, customers with highly desired vehicles, or customers who are in-market, reach out to us and we can help. Now, more than ever, we need to actively nurture our customer base, or someone else will.
- Pre-owned vehicles are a commodity. Make sure you are leveraging your current customers
- Consumer fear is at an all time high--reassure your customers with safe and appropriate messaging
- Utilize your BDC to be more actively reaching out to customers. They are your face of the dealership, and needed now more than ever
- If you do not have a BDC aggressively making outbound calls, reach out to BCP. We are here to help!