Is Your Dealership Losing Money on the Front End? Here’s How to Fix That FAST
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As the microchip shortage continues to top the industry buzz, the delivery of new vehicles to dealerships across the country has slowed down considerably. And while more people return to the office or take long road trips after excess time spent at home, the demand for vehicles has picked up major steam.
With new vehicle inventory production currently in flux, this increased demand has more shoppers than ever looking to purchase used vehicles—which also means trade-in values are higher than ever. As trade-in valuations reach record highs, so does the opportunity to create increased profitability for your dealership.
The Rise in Vehicle Demand Brings Trade-In Values to New Heights
According to an analysis from Edmunds, trade-in values during March of this year were 21% higher than they were just a year ago, averaging $17,080 per vehicle versus $14,160 in March of 2020. This is good news for consumers looking to sell or trade their vehicle in for a different model—and great news for those who are upside down in their current auto loan, as they could see a rise in their vehicle’s valuation.
When combined with continuing low interest rates, the rise in overall trade-in values across the automotive industry has also assisted in keeping average monthly payments for new purchases consistent, per this press release from J.D. Power. Continuing on, the effects of the microchip shortage are predicted to continue into the foreseeable future, leaving dealerships with no choice other than to acquire more used vehicles to meet demand.
How Does the Demand for Used Vehicles Prove Beneficial for Dealers?
Across the country, the current microchip shortage is holding automakers back from producing enough vehicles to meet the ever-rising demand. Showrooms are seeing consumers purchasing most makes and models almost immediately after they’re made. In turn, the demand for used vehicles is steadily rising, making now the perfect time for your dealership to improve your dealer software and trade-in process to start making some serious sales.
New car and truck prices are steadily climbing with the average sale price reaching $42,831 in July, while used car prices have risen a whopping 45% over the past year. While everything from newer used models to basic models are flying off the lots, now is the time for dealers to take advantage of this increasing demand. Even though unemployment rates are much higher than they were pre-pandemic, consumers still have the need and the cash to spend.
Pairing a strong inventory acquisition strategy with the right dealership advertising solutions to help attract both new and returning customers will be key to beating the competition and continuing business growth.
DEALER CHALLENGE: Where Does Your Dealership Stand?
What percentage of your dealership’s car deals come from trades? If you don’t know, take a look. In order to reach peak profitability, trades should account for about 60% of your car deals. If that’s not the case, why?
❓ Could your sales team be suggesting to customers that they sell the vehicle on their own?
❓ Could your customers be selling used vehicles to CARMAX, Carvana, or Vroom before coming to you because they feel that’s a better model? We can change their minds!
With used car profitability through the roof right now, you can’t afford to deter any opportunities to cash in on trades. The questions presented above leave money your dealership could be making on the table. Challenge your appraisal team to not be wary of the future but to take advantage of these opportunities today. This isn’t going to turn back on a dime—make the money now.
✔️ Challenge your dealership to make trade-ins account for 60% or higher on any car deals.
Seize the Dealer Benefits of the Demanding 2021 Used Car Market
While sourcing not only enough but the right used vehicles to sell has become another battle auto dealers have had to face in 2021, the opportunity to make big money is there for the taking. Differentiate your dealership from the competition and set yourself up for success in 2022. Affinitiv has powerful end-to-end solutions—backed by our predictive intelligence platform Atlas DX—and the experts to help you navigate this rocky terrain and come out on top. Contact us for a consultation today.
Take action now! The experts at Affinitiv are ready to help. Contact us today for a consultation.
All | May 02, 2023