Used cars parked

Do Used Car Customers Buy Old Cars? We Have The Answer.

Are you a dealership that automatically wholesales out all trade-ins more than three or four years old? You may want to reconsider. Why? Because you might be ignoring a large sector of the used car buying public.

If you’re like most dealers, you sell significantly more used vehicles than new cars, and the current market conditions are likely to continue that trend. A huge number of off-lease vehicles turning over, combined with a decline in household spending, is driving more interest in used cars among buyers nationwide. Are you paying enough attention to your dealership’s reconditioning and remarketing operation?

What can we learn from the last 600,00 auto loan inquiries? In a recent study by LendingTree, more than 600,000 auto loan queries were studied in over 100 popular metropolitan areas, and they found that the average age of a used car people sought to finance was about five years old. The data set was limited to inquiries submitted in 2019 for cars and light trucks with model years older than 2019.

That may be shocking to most dealers who may not consider a five-year-old car for anything other than the “under nine grand land” which tends to just exist as a small backlot for a handful of cars that are clean enough to resell. 

Geography does matter, though. This trend could be a combination of different economies, regionally and stricter inspections and registration laws. But the spread of those who purchased newer used cars and those who purchased older used cars is pretty scattered.

Residents of Spokane, Washington, purchased the oldest used cars with an average age of at least 7.66 years.

Facts about metros that buy the oldest cars

1.    Spokane, Washington is the metro area that sought financing for the oldest cars, with 7.66 years old on average. 

2.    Wichita, Kansas came in second with car buyers here seeking loans for cars just under seven years old.

3.    Ogden, Utah ranked third nationally for those seeking to buy the oldest cars, with an average age of 6.80.

4.    More southern cities joined the top 10 this year, including Knoxville and Chattanooga, Tennessee, and Greenville, South Carolina.

5.    Across the board, the average age of vehicles for which people are seeking financing has dropped from 6 years in 2018 to 5.34.

6.    Colorado Springs residents finance cars with an average age of 6.63 years old.

Facts about places that buy the newest used cars

1.    San Jose, California buys the newest of the used cars, with an average age of 3.54 years.

2.    Miami, Florida is in second place with an average age of just under four years old. 

3.    Orlando, Florida’s average used car purchase age, is just slightly under five years old.

4.    San Francisco sought loans for cars with an average age of 4.03 years 

5.    Los Angeles and Oxnard California stand at 4.42 and 4.67 years, respectively.

6.    On the East Coast, Washington D.C. to Boston largely sought newer used cars.

7.    New York residents buy used cars with an average age of 4.04 years.

8.    Texas residents financed used vehicles with an average age of 4.14 years old

In cities where buyers preferred newer used cars, the cars average 4.12 years younger than the ones purchased by buyers in the places that buy the oldest used cars. This is an interesting statistic, and one worth watching to identify shifts in markets. 

So what can we learn from this? As more and more car buyers turn to used cars, it could help grow sales to be aware of the ages of cars that people finance in your area. Clean and quality units still exist out there, and it may make sense to have your buyers experiment with different years to see if it holds true in your municipality.

Regardless of the average age of used cars you sell, they all need attention to make them frontline-ready as efficiently as possible. We can help with that. Contact us to learn how we can reduce your costs and increase your margins on used cars.

Used cars on dealer lot

5 Tips For Operating A Successful Used Car Business

Running a business can be both an exciting and challenging time, and used cars are an increasingly popular choice among consumers. According to Auto Remarketing Magazine, over 40 million used cars were sold last year. Despite the challenges of the global pandemic, the used car market in the US continues to be robust, and many are forecasting an increase in sales as consumers avoid public and group transportation. 

So, how do you operate a used car business that’s built for success? Do you have enough space for displaying your cars? Are you near any other dealerships to get more customers? All these and more are things to consider when starting a used car business. The following are five tips for operating a successful used car business: 

1) Find Your Niche 

You’ve decided to sell used cars at your dealership, but do you know exactly which type? Finding your niche will help you stand out among other dealerships in your area and could increase your chance of success. You could have a used vintage dealership, a used luxury dealership, or maybe even specialize in used trucks and SUVs. The possibilities are endless! Do your homework, decide on the type of vehicles you want to offer, and calculate the volumes and margins you will need to turn a profit.

2) Ready Vehicles 

Selling used cars at a dealership doesn’t mean just slapping an “as-is” sticker on the window. Each one of the vehicles in your inventory should have proper maintenance and thorough inspection. Any repairs that need to be made must be documented and kept on file. You need to invest in an efficient reconditioning process to make your vehicles presentable on the lot. 

3)  Offer Warranties

A lot of people coming to used car dealerships might think the available cars are “what you see is what you get,” and “what you can’t see may come back to bite you.” This is why it’s essential to offer some warranty options for customers. It provides them with a bit of a safety net, you with incremental revenue, and can increase the chance of them purchasing at your dealership. 

4)  Customer Service 

Customer service is part of the car buying experience at a new car dealership, and it can be an important differentiator at your used car dealership. Provide your customers with a CARFAX or AutoCheck.com report or a free vehicle identification number (VIN) report. The more information you can provide about the car’s condition and service history, the better. Providing the honest data will show your customers that you respect their desire to know more about the vehicle and that you’re able to assist them in the process. 

Another way to show excellent customer service is to follow up any sale with a “thank you” email or a phone call. It’s a great way to show that you weren’t helpful to them solely for the purchase of their car. Doubling down on customer service will pay back in referrals and repeat purchasers.

5)  Location, location, location 

Unless you are ready to compete in the growing virtual dealerships arena, all of these tips won’t matter if you don’t choose the right location for your used car dealership. Do you have enough space to display your cars on the lot and have a place to store vehicles if there isn’t any space left? Is there enough office space for you and your team? Is there a service department area for repairs? How close or far away is your dealership to others in the area? It might come as a surprise to you that being closer in proximity to other dealers increases your chance of drawing in more customers.

If your passion for automobiles is strong enough to drive you to help others find the right vehicle for them, running a used car operation can be both fulfilling and rewarding. The tips above will help get you started on your way.

auto reconditioning center entrance

OEMs Prioritize Service Parts, and So Should You

With new vehicle sales well below last year’s numbers, and in anticipation of continued soft new car sales this year, OEMs are pinning their hopes on providing parts to keep their vehicles on the road and promote their brands to customers.

May vehicle sales are about a third below the previous year and, although that is an improvement from April’s trough, it informs models that predict a loss of more than 1.5 million retail sales in 2020. It’s in the OEM’s interest to ensure that the ownership experience for their brands continues to be positive, and that means keeping supplies of service parts flowing through the supply chain.

For repair services and reconditioning operations, this is a cue to examine the efficiency of your parts pipeline and operation. What parts do you keep in your on-hand inventory, and how long does it take to acquire ordered parts? Is there a gap between when a part requirement is identified and when it gets ordered? And how long do vehicles wait for ordered parts to arrive?

AMT‘s reconditioning management systems include parts integration so that as soon as a needed part is identified, the system can either auto-approve or escalate the request for management approval. The approved part can be ordered right within the software from a list of popular suppliers or from your internal inventory. All stakeholders have visibility into parts on order and expected arrival to keep your operation running efficiently and reduce cycle-time. We’ll be adding a Parts Inventory Module in August 2020 to complete your 360-degree view of reconditioning and fixed operations our software provides.

To learn more or schedule a demo, contact us.

Used cars parked

Empathy, Cooperation are Key to Industry Restart

How to restart an industry? Work together as an industry!

Hertz, Thrifty and Dollar rental car logos

The Hertz Effect on Vehicle Sales

With the bankruptcy of Hertz Global Holdings, Inc., there will soon be an extraordinary volume of vehicles on offer, creating a bulge in a pipeline already constricted by the global pandemic. Hertz, down to their last billion dollars, will need to accelerate the rotation of their inventory as a cash resource to replace missing revenue from their operations.  Reported volume estimates predict vehicle counts in the hundreds of thousands.

In order to expedite this process, Hertz will be unable to move this volume through its branded sales operations, and will need to dispose of most of their vehicles through other means. Auctions would be the traditional mechanism, but ADESA and Manheim and many smaller auction houses are still at reduced capacity due to health and safety restrictions in many geographies. Hertz, or the court, will need to orchestrate direct sales to dealerships in order to liquidate as quickly and efficiently as possible.

This is an opportunity to acquire late-model vehicles with low reconditioning needs. Assets that you can prep for sale at low cost and in little time. In his recent article giving good advice on how to approach this as a dealership, Jason Unrau cautions:

“Dealers should be prepared to move quickly on rental vehicles that come to market. Snatching up batches of a particular make and model, or vehicle style, could be a great way to position a dealership in their locale. Cars bought from rental agencies tend to have extremely low reconditioning costs and offer an easy way to sell used cars at a higher volume.” 

I see this as another opportunity for our industry to “do well by doing good”. Hertz is an iconic brand family that has been set on its heels by unexpected forces. They are far from the only pandemic casualty we will see, particularly in the travel and hospitality sector, but they are the largest so far. The automotive industry has an opportunity to help them recover by purchasing these assets and infusing Hertz with the capital they’ll need to continue operations while they figure out what a post-covid Hertz looks like.  

While the reconditioning of these and other rental cars is normally less complex, they still must follow your process and be fully prepped for resale. If you aren’t using software to manage the work in your fixed ops or reconditioning department, the money you save in lower repair requirements may be lost on inefficiency in doing the work that is done. ReconMonitor™ is a software solution that keeps you in command and control of your recon operation. From acquisition through the entire process to frontline-ready, the software keeps technicians and teams on task and removes the bottlenecks that cost you valuable time and money. If you are ready to reduce your operation’s vehicle turn times and maximize your profits, you should contact us.

Open for business neon

Re-creating Your “New” Business

No matter how many years or how many generations your business has been in existence, you are starting a new business. Changes in our economy and society related to the pandemic have reset nearly everything from employment to operational practices to consumer priorities. Your business will need to adapt in order to survive. Now is the time to reinvent your business to operate in the new environment.

What probably hasn’t changed: 

  1. The quality of your products and services.
  2. Your commitment to your customers, employees, and stakeholders.

What has changed:

  1. Everything else

Our society is interconnected, so when one element changes, it affects related elements across the society. High fuel prices led to subcompact cars. Lower fuel prices and greater vehicle efficiency brought on increased purchase of trucks and SUVs. Stay-at-home restrictions resulted in record sales of personal grooming products, jigsaw puzzles, and computer audio/video equipment, and effectively paused fashion and apparel sales.

Setting up your post-pandemic business plan (you need one) requires the same considerations as with any new start-up. The four P’s, product, price, place, and promotion, are still the foundation for your plan. Chances are, at least one of these variables will be different moving forward. Is your product still relevant? Is the demand and perceived product value changed and can you adjust price as a result? How will your product be consumed now? Do you need to modify the way you deliver your product to your customers? How many other people do you need to help you deliver? Finally, what changes should you make to your advertising and promotion in order to engage or reengage your buyers in the marketplace?

The answers to these questions and others will inform your way forward, but your need to assess and develop will continue. Markets and businesses may reopen more gradually than anyone would like. Volumes and budgets will be smaller, and consumer confidence will be tentative until employment and payroll numbers stabilize again.

If you run an existing business, you may benefit from your experience with other hard economic times and take the lessons learned from them to plan your own recovery. Regardless of prior events, this sudden national and global shift is more extreme that anything we have seen in our lifetimes, It is an opportunity to reinvent ourselves and our businesses in response. Every one of the four P’s is on the table for examination.

I would add another two P’s to that list, too. Examine your process and the productivity it generates. You may find opportunities to improve efficiency in your process, either by making changes or by better enforcing the processes you have in place. Management software by AutoMobile Technologies could be the right solution for running your automotive repair and reconditioning operations, and now as you reimagine and redefine your business, it’s the right time to enhance your command and control of the operation. Contact AMT and let us show you how we can help.

Focus on recon

Maximizing Hourly Revenue

Used cars parked

Reconditioning Your Way to Profit if Used Car Values Tank

When your cars have no buyers, how do you prepare for the future? The transfer of new-to-used, used-to-auction, and rental-to-auction has been at a two-month standstill, and the cars are piling up. Just six to eight weeks ago, demand was outpacing supply, and now we have the opposite.

Dale Pollak, an executive vice president of Cox Automotive, which owns North America’s largest auto auction company, wrote in an open letter to auto dealers last week:

“Six months from now, there will be huge, if not unprecedented, levels of wholesale supply in the market, cars are coming in, but they aren’t selling. Today’s huge supply of wholesale inventory suggests supplies will be even larger in the months ahead.”

Manheim auctions are already struggling to find places to park the cars heading to auction.

Nobody, not even the best in the industry, knows which way the wind will blow when the economy reopens. We know not when, nor how the economy may reopen. Another wild card will be how fast the unemployment rate reverses and what the current experience will mean for consumer confidence. Unlike other economic downturns, this one was a giant pause button, so it may be safe to assume that many of the recently unemployed will get rehired.

Dealers are holding onto that hope, and here is the proof: used-vehicle prices at retail as of mid-April are off by just 1 percent, while wholesale values are estimated to be down 10 to 12 percent according to Pollak. It’s an odd gap.

“Generally speaking, there’s a correlation between the movement of wholesale and retail pricing,” said Pollak, Cox executive vice president and co-founder of vAuto software. “But we’re at a strange moment in time where we’re not seeing that correlation.”

One reason could be dealers remain optimistic the economy will reopen soon and so have mostly held steady on retail prices. Some may be leery of marking down vehicles acquired at pre-pandemic prices.

Pollak sees this as an opportunity for dealers willing to mark pre-epidemic purchased vehicles down to liquidate stock while stockpiling cash to be used to purchase fresh inventory at discounted prices.

Conversely, a nightmare scenario for any dealer would be to think vehicles are still worth pre-outbreak values and then take in too many trades they can neither retail nor wholesale for a profit.

With such minute transactional data available, trend-spotting is impossible, and that is the point of frustration for many dealers.

Lease Extensions Could Help Stave Off The Glut Of Used Cars

Despite total factory shutdowns, automakers are doing what they can to limit the damage to the market. General Motors Co. and Ford Motor Co.’s finance units are already offering customers one-month lease extensions. This should help relieve the pressure on both the supply and on the consumers who are reluctant to visit showrooms during a pandemic.

Plug The leaky Holes In The Reconditioning Process

“It’s critical for dealers to recognize what may be an unpleasant truth; it might take all the cash you can gather to sustain your business today and put it in a position to be viable when the market comes back,” said Pollak.

When we all get back to work, be that May or even June, one thing appears certain: used cars will be cheap to buy but possibly harder to sell. In order to get aggressive in your pricing and out-sell the dealer down the street, you need to sharpen the pencil on your reconditioning costs.

Certainly, there will be more clean used cars to purchase, but the margin gains may really come from the ones you can buy for pennies on the dollar. These may have a few more cosmetic blemishes than you are used to buying. Good reconditioning will always add value, so it is a critical element in getting the best return. That said, every cent saved in reconditioning costs is profit on the back end.

Restarting the economy will be a collective effort. Now is the time to work with your reconditioning vendors and employees to plug the holes that leak profit from your reconditioning process. If you are still using a post-it note and whiteboard system, it’s time to get out of the stone age. Though some people may be initially reluctant to learn and use it, software exists to streamline operations and can permanently fix the profit leaks in any system.

When shopping for reconditioning software, consider AMT’s ReconMonitor, a reconditioning management platform built to serve dealers, auctions, and professional reconditioning operations.

Merger

Changes to the PDR Landscape

Street sign displaying "Time to say Goodbye"

How to Help Your Laid-Off Automotive Employees Manage Unemployment

Social distancing is the end of in-person auto auctions, at least for a while. If you are like most auction companies, you have switched to simulcast. An online-only situation and a potentially declining demand for sales (although the numbers aren’t out yet) may have forced a layoff for some of your employees. The same is true for many related specialties, like dealerships, body shops, and large recon MSO’s. Here are some tips to help them through this process.

If you lay off or furlough your employees, they are eligible for unemployment. Some states like Mississippi have ridiculously low caps, barely enough even to buy groceries each week. As an employer, you have no control over what they can receive when they apply for unemployment benefits.

But here’s what you can do:

Don’t block unemployment.

When the state sends out unemployment eligibility documentation, don’t mark the employee as fired for cause, which would keep your unemployment insurance rating low, but would lock the former employee out of a check. It could also save you a wrongful termination suit down the road.

Severance pay if you can afford it. 

In Maryland, you can file immediately for benefits and begin receiving a check, but other states have red tape and waiting periods. Your employees will need money now, not later, and severance will help get money in their bank while they get their ducks in a row.

Extend health benefits. 

The humanitarian thing to do during this health crisis is to continue paying benefits. You will save the bottom line in reduced salaries and payroll taxes, but be kind and keep the health insurance going at least until the nation is in the clear. Hopefully, it will only be a month or two at most.

Rehire as soon as possible. 

When life returns to normal, so too will the business demands. Your former employees are the best suited, best-trained employees for your business because they used to work there. If these employees are still available, not only will they be grateful that you wanted them back, they will probably be even more productive than they were before they were laid off.

Keep an Eye on the Federal Stimulus Package. 

As of this writing, the federal stimulus package is still not passed. But if it does, there will be some financial relief for small businesses and some options for you as an employer. It’s too soon to advise on that in a blog other than to suggest that there may be solutions for you forthcoming, and they should be taken into consideration for you and any employees you have to cut from the team.

Offer outplacement or other unique support options. 

This will definitely depend on your company’s budget, but there are outsource outplacement companies that you can hire that specialize in the outplacement of displaced employees. These experts help employees polish resumes and work their networks to find employment. This is especially useful if you have no intention of rehiring any of this staff.

Layoffs are simply one of those business decisions that you have to make to ensure the survival of the company. It can be uncharted territory for many business owners, especially in the wake of a new-to-all-of-us global pandemic. Hopefully, these tips will help you handle this rather unpleasant situation.