Dealers are finding themselves at a crossroads as the used car market undergoes a significant transformation with declining prices, inching back to normalcy. It is within this shifting landscape that dealers must navigate strategically, adapting their approaches to not only weather the storm but emerge stronger. In this article, we unpack some recent data & give some expert recommendations moving into Q3.
Prices are on the decline, but not at the same rate...
This graph from Cox Automotive shows the price changes year-over-year from Mid-June.
Pickups remain the lowest percentage change at -6.2%, while luxury & compact cars are at the highest % of change at -11.2% (Luxury) and -10.9% (Compact).
This may just be the tip of the iceberg. Several reports indicate used prices will continue to decline drastically due to oversupply & OEM new car incentives. Yahoo Finance reported that a recent UBS report estimates that car production will exceed sales by 6% this year, “leaving an excess of 5 million vehicles that will require price cuts.”
GOBankingRates suggests “automakers are preparing for a price war, and some electric vehicle makers are already slashing prices.”
So What Should Dealers Do?
Based on this information, Auction Central experts suggest the following…
It is important to move aged inventory, especially luxury/compact cars that are dropping value at a much faster rate. Note that there will likely be losses when moving this inventory, but that loss increases exponentially the longer it sits on the lot, depreciating in value & ringing up an even higher interest bill.
Now while it may be tempting to halt vehicle purchases during these challenging economic times, maintaining an active presence in the market will yield more of a significant advantage. Staying with the market and cost-averaging inventory allows the dealership to continue to function somewhat normally.
However, we do not recommend a complete “business as usual approach.” Operating in the market at this time requires careful financial planning and risk assessment. It is not the time to take risks & gamble by bidding on potentially problematic cars at auctions with very little transparency. That is where Auction Central comes in…
How Can Auction Central Help
Auction Central is your outlet to staying current with the market. Offload your aged inventory & source fresh vehicles safely with some of the best tools on the market. With Auction Central’s Condition Reports, there are no hidden surprises, and if we happen to overlook any detail, we take full responsibility. Rest assured, Auction Central empowers you with the utmost confidence in making informed decisions. Check out our Buyer Tools & Seller Tools pages for more information.
Not registered with us yet? All it takes is 5 minutes! Click Here to get started.
Sources
Cox Automotive
- https://www.coxautoinc.com/newsroom/market-insights/
- https://www.coxautoinc.com/market-insights/mid-june-2023-muvvi/
GoBankingRates
Yahoo Finance
