We have come to the end of an unprecedented used car inventory cycle that saw used car values appreciate at the fastest rate in the history of the car business. The post-pandemic boom, cheap financing, and the chip shortage caused this once in a lifetime event. Those dealers with large used car inventories rode the wave to record profits. Those with tight inventory were frustrated by not having enough cars to sell.
Now, as the used car market is rapidly normalizing, dealers are starting to feel the pain in the transition. It is normal for used cars to lose value as newer models come out and the vehicles are used more. JDPA values in September dropped at an alarming rate, the fastest since March of 2020. OEM’s are reporting improving new car sales and chip supplies. Rental car companies are replenishing their fleets and offloading rental cars after their summer run. Vehicles will continue to depreciate through the end of the year.
The good news is that this new and younger generation of car dealers will have their own macro-economic event to learn from just as their predecessors had in the 2008 financial crisis, 2012 slowdown, and 2020 Covid downturn. These events force dealership operators to run their dealerships more efficiently, watch every dollar in cost, and make every deal count. It makes fixed operations profit that much more vital.
The good news is that the younger, more technical managers are better at leveraging tech tools to unlock serious productivity gains at the dealership. Digital inventory management tools like Dealerslink reduce desking head count and increase gross profit per deal by applying proven analytics during the trade devaluation process. There are huge cost savings here. Proper use of digital marketing budgets can trim wasteful cost of advertising. Utilization of Dealerslink’s dealer-to-dealer trading platform reduces wholesale losses and fee expenses. It also opens new opportunities to sell more vehicles and reduce reconditioning costs when acquiring through the platform.
All of the efficiency gains these new managers will learn and adopt will ultimately set them up for future success when vehicle valuations stabilize and their dealership profits will be rewarded from these exercises in efficiency.