4 tips to better manage your car dealer’s second-hand department

4 tips to better manage your car dealer's second-hand department

It repeats the obvious, but the auto industry does not operate in a vacuum. This is especially true when it comes to the second-hand side of things. Record prices for new vehicles and rising interest drives customers toward used offerings as shiny new rides become less affordable.

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

So now is the ideal time for dealers to re-evaluate their activities in the second-hand department. An analysis of best practices can improve the result and help prepare for any market fluctuations that may occur later.

1. Inventory

Keeping used cars in top shape is all about inventory, and every coin has two sides. In this case, it’s about quantity and quality. Of course, quantity is a delicate balance that must be constantly assessed. There must be enough inventory to appeal 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 when this was last done, you know where to start.

In addition to having the right stock, it is offering vehicles that are suitable for your customers. Many pick-ups don’t make much sense if customers need more fuel-efficient cars. That’s why an ongoing inventory analysis needs to look at what’s on hand and what people want.

2. Prices:

The decline in the value of used cars at the wholesale trade and the flat numbers at the retail sector have created a ‘pillow of forgiveness’. But recent downward trends in the average transaction price mean that dealers need to be more responsive. The decline in retail has been modest so far. Still, it’s a safe bet that the continued rise in consumer loan costs will put further pressure on the used car retail business.

Just as the inventory must be constantly monitored, so should the prices offered by the used products department. Because if you don’t adjust prices to market conditions, chances are a competitor will.

3. Trade-in process

Like it or not, CarMax, Carvana, and others have redefined trading in trade-in. If the way you handle appraisals hasn’t changed in the last decade, your business is lagging behind. Online services can help you move into the 21st century and at the very least generate trade-in leads. At the same time, this is a great opportunity to standardize how you handle business in-store or over the phone.

  • Use a review form: Present a form to each valuation client (or have it available as a web download or email or text attachment). The document must be completed in full, signed and returned by the customer. Off-site customers can take a photo and send it back by email or text message. You also want the external customer to attach photos (describe what you are looking for on the form).
  • View the document: As practical as possible, go through the document with the customer to confirm the details and fill in any blanks. Take this opportunity to explain the process, including how to view vehicle history and current market conditions. Also explain that any valuations are subject to a final on-site inspection and other requirements.
  • Explain the assessment: When you’re done, go through the assessment with the customer. Any problems with the vehicle must be stated in writing on the valuation form. This will help justify the offer and make customers realize that their cars are not perfect.
  • Be transparent: Above all, be honest with the customer about how your dealer handles appraisals and trade-ins. Not only will this reduce anxiety, but it will also help build confidence. Part of this involves walking around the car (either during initial contact or final stage) with the customer to explain any issues or imperfections.

4. Vehicle Details

In many cases, a potential pre-owned customer will first come across your dealership through an individual vehicle description (such as through an online marketplace or aggregator). The content of this list is therefore crucial. This information must in any case contain the following:

  • The basics (price, mileage, powertrain, exterior color, interior color/trim)
  • All standard and optional features
  • Extensive photos (inside and outside)
  • CARFAX Report
  • Notable features (no accidents, one owner, etc.)

If an ad doesn’t have this information, the car is at a competitive disadvantage compared to what else is out there. Moreover, the minimum is no longer good enough, thanks to well-organized online dealers and smart physical competitors.

Consider upgrading each vehicle list with a paragraph summarizing the highlights and why someone should buy this car. Then add a section or a few bullet points to emphasize why the customer should buy from your dealer. Stick to the top three points to keep it simple. This information can be anything from free oil changes to a comprehensive inventory – you need to know what brings them in your door.

Also remember to include a short video showing how the car starts. Take a look behind the wheel and a look under the hood (and listen). Such a simple effort instills the buyer’s confidence in the vehicle and your dealership.

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