Expertise is vital in today’s used car market

As February draws to a close, I thought it appropriate to pause and consider where the market is today, and where it’s heading next month.

New car supply has improved to near-normal levels, with availability generally very good. One of the vital missing constituents, however – the retail consumer – appears to be in retreat. As build schedules are programmed far ahead, this is likely to result in surplus unsold vehicles needing to find homes.

The success of the key March registration month will be a determining factor in how many of these vehicles head towards the short-term daily rental and other fleet user outlets. The challenge here, as we all know so well, is these vehicles are all likely to come back to the market en masse six to nine months from now. It’s something savvy retailers will already be monitoring and preparing for.

As an aside, we shouldn’t overlook the fact this new car market fragility will likely be at the forefront of OEM’s minds, particularly when considering how far to kick the agency can down the road!

Used car supply

January started with low levels of inventory in the wholesale market, and it took a good few weeks for de-fleeted vehicles and retailer part exchanges to hit the market. The current market appears to be fairly buoyant, but sourcing good retail stock remains a real challenge.

Many retailer groups and car supermarkets have had to take cost-saving actions in their vehicle sourcing operations as a result of a particularly tough Q3 and Q4 last year. This has made them financially fitter, but exposed to sourcing the right stock at the right price, and of course, at the right time.

Levels of depreciation have so far been very low, and current forecasts suggest stability in the short term.

Nevertheless, the appears to be a great deal of caution in terms of stock levels, days to sell and the all-important stocking costs. At 2% over base (7.25%), this makes holding used car inventory a very finely-balanced challenge, one that requires a great deal of skill and expertise to navigate.

Follow the fundamentals

In such a marketplace, I urge retailers to review just how efficient their used car buying strategy is. Do you know exactly how many valuation enquiries and hits you are getting? Do you know how many are being proactively managed?

My key takeaway this month is to review current used car processes across the business, and ensure the fundamentals are being consistently applied and followed every day.

Let’s face it, we’ve enjoyed an exceptionally strong period in used cars over the past few years. I know some of those fundamental principles of good inventory management have slipped away: now it’s time to go back to basics and keep on thriving despite the current challenges.

YOUR ACTION PLAN

• Know what cars to buy – it sounds obvious, but it’s important!
• Being risk aware in this market will greatly assist in achieving success.
• Remember days to display – look closely at potential prep costs and times
• Focus on margin potential on a days-to-sell basis