Be Prepared to Feel the Used Cars Hangover

March 04, 2022

The current market for dealers is thriving, taking advantage of the high demand and low supply. Many dealers are boasting about their numbers from last year, which is simply the new norm in today's market.


However, businesses may be booming. It's essential to keep things in perspective- the pandemic crushed last year's numbers, so any increase this year is simply par for the course.


As car dealers bask in the glory of their newfound profitability, they should be thinking about ways to make sure it lasts. After all, this is not the first time the automotive industry has seen good times – and it certainly won't be the last. So what can dealers do to make sure they're ready for the next downturn?


Now is a crucial moment to consider long-term success because we already see market changes. Price levels will stabilize as chips arrive, inventory will grow more widespread, and wholesale and retail prices will begin to normalize gradually.


If you want to keep your business running, as usual, you can expect to see a drop in your profits. However, there are ways to keep the momentum going.



Check for Flaws in Your Current Processes

As the car market heats up, dealers find new and inventive ways to make a buck. Unfortunately, this often means that they're neglecting the most important part of the car-selling process: reconditioning.


Sure, sales may be up, but what happens when the market inevitably cools down? When buyers start looking for cars that have been adequately taken care of, dealers who skimped on reconditioning will be out of luck.


Dealers aren't concerned about the process when business is slow. When things get busy, however, you'll want to be able to rely on those enhanced procedures to take advantage of new opportunities. 


There's no better time than now to get your aged inventory off your property and establish those internal reconditioning procedures that will keep you competitive, regardless of what market fluctuations occur.



Understand What You Must Do to Maintain High Turn Profitability

If you want to maintain this high turnover rate, keep your inventory levels lower. Keep in mind, though, that keeping fewer goods on hand puts even more strain on your internal operations. Speed to market currently trumps cost-to-market, so a more efficient recon process is essential.


If you're looking to procrastinate, there are plenty of things you can do. But if you're looking to improve your efficiency and profitability as a car dealer, then you should focus on your inventory.


Bronze, gold, and platinum cars require different treatment, so it's important to understand the best order to push them through recon. With the right tools and technology, you can make sure that each car is treated in the most effective way possible.


Following are some bonus tips to help you stay ahead of the curve:

  • Use market data to price your cars correctly
  • Make sure your reconditioning staff is adequately trained and has the proper tools to do their job
  • Understand what buyers are looking for in today's market
  • Consider using a 3rd party reconditioning service to take some of the load off your own staff.
  • Use a mobile app to price and stock vehicles
  • Get quotes for your reconditioning work in advance
  • Take advantage of online car auctions



Final Thoughts on Used Car Hangover

When the pandemic hit, many dealers quickly took advantage of the market. Making profits was easy - all you had to do was ride the wave. However, holding on to your procedures for the duration of the period is a certain way to have the market control you.


What's more impressive is that you can still maintain profitability when the market falls. That's the trademark of a true winner who has established good processes in place.


Take advantage of the new normal to adjust your internal processes to maintain recon effectiveness, high turn, and profitability as the situation calls for it.


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