Used Car Sales Tip: Stock Multiple Brands

Webinar experts: With supplies low, new rules required

Arlena Sawyers
Automotive News — December 21, 2009 – 12:01 am ET

With tight supplies of used vehicles, dealers should stock multiple brands and accept lower profits, says Dale Pollak, CEO of vAuto, a used vehicle inventory management company.

“We need to rethink the rules of engagement for sourcing cars in this new environment,” Pollak said during a Dec. 8 Automotive News Webinar, “How to Find Used Cars in a Time of Scarcity.”

Pollak said annual new-vehicle sales of 16 million-plus earlier this decade generated an abundance of trade-ins that could be retailed as used cars and trucks. Additionally, auctions were overflowing with off-lease and retired rental vehicles.

But now those trade-ins have dwindled along with new-car sales. And with more dealers emphasizing their used-car operations, finding the right vehicle at the right price is more challenging.

Pollak said dealers must let go of old habits, such as stocking only brands consistent with the franchises they hold and vehicles that have sold well in the past.

He said dealers should seek any used vehicles that are in high demand and short supply because consumers are willing to pay more for them. Technology allows dealers to identify those vehicles, he said.

Pollak said dealers may have to pay more for the right vehicle and accept a lower profit. He said this isn’t optimal but is sometimes necessary.

“There is a large, vibrant used-car market out there,” Pollak said. “Dealers are heavily invested in facilities, equipment, people and processes that allow them to profit from the sale of any used vehicle.”

Sourcing used vehicles

Dale Pollak, CEO of vAuto, offers these tips for sourcing used vehicles.
• Stock high-demand, short-supply vehicles.
• Pay more for the right vehicles.
• Accept lower profits.

Tom Kontos, executive vice president of customer strategies and analytics at ADESA, shared data that explained why used-vehicle supplies are tight at the nation’s auto auctions.

Kontos said the number of new vehicles sold to rental fleets fell from more than 2 million in 2006 to 1.5 million in 2008 to an estimated 1 million in 2009.

Those retired rental vehicles used to re-enter the market as used vehicles after 12 to 18 months. But now they stay in rental fleets longer and re-enter the market in lower numbers and with more miles on them, Kontos said.

Citing data from CNW Marketing Research, Kontos said new-vehicle leasing grew this decade until 2007, then plunged about 25 percent in 2008 and about 33 percent in 2009.

He said off-lease volume won’t decline dramatically in 2010, but dealers should expect continuing tight supplies.

“For 2011 and 2012,” Kontos said, “we probably shouldn’t bank on there being as many off-lease units as we’ve been seeing over the last couple of years.”

You can reach Arlena Sawyers at asawyers@crain.com.

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