At a time when many dealers traditionally “write down” the value of their used car inventory, my position is to consider holding, because 2013 may be the exception in terms of value moving upward.
2012 was dotted with tipping points that even experts didn’t anticipate. July, for example, posted double-digit sales far exceeding expectations, and it appears even November’s presidential election was not the sales damper predicted. In the aftermath of Hurricane Sandy, the estimated number of vehicles lost or damaged has hit 230,000. Wholesale prices are above seasonal averages and replacement inventory is coming in from as far away as California. Bottom line, if you have good used inventory, you hold because they are as good as gold.
The two main reasons for holding inventory into 2013 are the current perception building in the public sector and the historical success of dealerships that have traditionally promoted pre-owned vehicles in the first quarter of past years. News outlets are reporting an anticipated inventory shortfall and higher prices brought about by the Northeastern storms. This message stokes the fire in potential shoppers who know now is the time to consider buying pre-owned. This is a situation we have seen previously when the new car supply was questionable: buyers bought forward!
This positive potential for the used market has already influenced good operators to plan for increased used car exposure in the first quarter of 2013, but this comes as no surprise. In previous years, many of these dealers came out of the gate promoting used because they realized early sales momentum sets the pace for the entire year. Be positioned and primed to sell your used inventory in January and February!
Is it a gamble to go long on used cars? To paraphrase the lyrics of a famous song, “You got to know what to hold and know what to fold!” Every piece on your used car lot that represents an upside-down value situation – you fold! All inventory that you bought right – you hold! Make sure the managers communicate your “hold and fold” list to the sales force heading into the final week of the year.
Last month, exit polls asked voters if they were the same, better or worse in terms of economic condition. Nearly 70 percent responded the same or better – that works. With a market traveling in vehicles that on average are over 10 years old, they are driving on borrowed time. Now is the time to get your used inventory into the most advantageous position for you, and plan for a fast start in 2013. Let shoppers know you have the deals, because you can only count the money “when the dealin’s done!”
John Paul Strong
John Paul Strong combines his two decades of automotive marketing experience with a team of more than 140 professionals as owner and CEO of Strong Automotive.