2020 was pure, uncharted territory.
This year began like every other. The first quarter preparation was the same. Goal setting looked the same. Tactics varied ever so slightly. A steady, familiar course. Until it wasn’t. Here is what we learned in 2020 that will help you maximize profits in 2021:
1) Dealers are still feeling the impact of the inventory pendulum swing.
We’ve all heard and shared stories of fear and panic as we neared the close of Q1. Once it became clear that the world would keep turning and market conditions would keep consumers buying cars (and everything else), we exhaled, rolled up our sleeves, and got back to being the entrepreneurial backbone of the economy. In many cases, it resulted in record-breaking profit. Dealers went from selling everything to buying everything in a span of 45 days, and we are still seeing the effects of that play out.
2) As prices surged, dealer’s existing turn policies needed an overhaul.
As we entered the second quarter, dealers and OEMs alike shared sighs of relief and excitement as we watched sales volume increase. Signs of optimism were a welcome change to the previously daunting conversations. Along with newfound excitement came the rising and volatile prices—something most dealers did not predict—that would require more discipline and a faster turn to justify the higher carrying costs and commissions. As a result, they quickly learned that their 60 to 90-day turn policies were very problematic (along with a few other unexpected issues).
3) Pushing the limits of agility in every aspect became imperative for growth.
Fast-forward to Q4 and the industry is wrapping up a year of record-breaking profit. As we enter 2021, it is imperative to take a step back and ask: what’s next? The COVID effect has and will continue to bring several changes to the automotive industry. Some are good, others are not so good. Some are temporary, and some are permanent because we stretched our potential and discovered new capabilities. We were forced to do business in a new way without having time to overthink and talk ourselves out of it — and we thrived as a result.
2021 is fast approaching. We’re coming from nearly four straight months of wholesale prices declining while, according to the Bureau of Labor Statistics, unemployment is twice as high as it was in February. New car inventories are normalizing, most OEMs have a new and exciting product on the horizon, and dealerships have increased efficiency by scaling back internally. So, what lies ahead?
4) Adapt your plan now to prepare for new economic trends in 2021.
Economically, there will be more loss, but there will also be more financial opportunities for those that can see farther than the end of the month. For instance, payment delinquencies are certainly going to play a role in 2021. While lenders are striving to help consumers through this unprecedented time, they still have money on the street and a business to save. Because of this, I predict we will see more repossessions being added to the available inventory equation.
With this path in sight, it is time to step back and take stock of your operation to better prepare for what lies ahead. Are you prepared to face a new normal? Where is your time spent and how is it creating opportunity? What are you doing differently to source inventory in a booming used car market? What tools do you have to embrace modern consumer shopping methods? It’s time to reevaluate your plan and view your business with a fresh set of eyes because 2021 is going to be filled with opportunity.
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Insights | December 08, 2020