What is Your Used Car Strategy?

Leasing is WAY down

Dealer Principals and General Managers concur that the market for acquiring used car leases has plummeted and it’s much more tenuous to stock used cars. Previously, dealers could count on a steady influx of lease returns, easily turning them into sellable used cars on a three-year cycle. However, since the onset of the pandemic, lease returns have dwindled, leading to a severe shortage of used cars. In fact, some dealerships have experienced a decline from 80% leases pre-pandemic to around 30% today.

APRs are so much higher, and it’s creating a big demand with consumers for less expensive used cars. Dealers need to consider their used car inventory and evaluate their ability to meet this new demand for lower priced vehicles. If you are sending high-mileage autos to auction, it may be time to rethink that strategy and prepare those vehicles for sale on your lot. You may be doing okay with the auction process, but could you stand to make more profits selling those vehicles directly to customers?

Time to Rethink Your Used Car Strategy

• Stock and Sell High-Mileage Vehicles: Given the rising APRs and consumer demand for less expensive options, stocking high-mileage cars might be a win-win.
• Participate in Auctions: If you're short on high-mileage inventory, consider acquiring vehicles from auctions.
• Offer High-Mileage Vehicle Service Contracts: Selling service contracts alongside high-mileage vehicles can not only boost customer loyalty but also ensure future service work.

By adopting this multi-faceted approach, you stand to benefit from three revenue streams: the markup on high-mileage vehicles, the sale of service contracts, and additional business for your service drive.

A Checklist for Dealers Reconsidering Their Used Car Business

• Assess Current Operations: Take stock of your existing used car business.
• Examine Auction Strategies: What types of vehicles are you sending to auctions? Could they be more profitable if sold directly?
• Backend Products: If you decide to stock high-mileage cars, ensure you have backend products, such as high-mileage vehicle service contracts, to offer alongside them.

Beyond Stocking Vehicles: The Post-Sale Vehicle Service Contract

If you are uneasy with the idea of stocking more used vehicles, consider offering a post-sale vehicle service contract product for your customers who are out of warranty and planning on keeping their vehicles long-term. This provides another avenue for profit while encouraging repeat business for your service drive as well.

These strategies not only help to adapt your dealership to the changing market but also potentially open up new and profitable avenues.

For more information about how used car sales can benefit your dealership, reach out to Kevin Murray at kmurray@ezvds.com or on Linkedin.