Car Dealers Get Creative in Acquiring Inventory

It’s a tried-and-true double play at car dealerships.

Customers trade in vehicles and buy new ones. Dealers, in turn, sell the trade-ins. Both the new-car and used-car departments profit.

But dealers are seeing a trend lately that distresses them. Many customers aren’t arriving with trade-ins because they’ve already sold their vehicle to a willing buyer during these times when both new- and used-car demand outpace supply.

“It’s a volatile market,” says industry veteran Randy Barone. “Customers not coming in with a trade is an alarming concern for many dealers.”

He is a former franchised dealer who now serves as vice president-business development at MAX Digital, a provider of inventory management and pricing software.

His company, owned by ACV Auctions, works with dealers to increase trade ratios and use various techniques to acquire vehicles from consumers, trade or no trade.

“We train dealers on buying cars directly from consumers,” says Barone (pictured, below left). “Those usually are the most desirable vehicles, because they come with a ‘storybook.’”

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ACV and MAX Digital have come up with nontraditional ways for dealers to obtain vehicles directly from consumers.

That includes dealership events that resemble auctions. Billed as live appraisals, they use digital technology to reach a wide range of “bidders.”

Here’s how it works:

Through marketing, dealers connect with prospective sellers, telling them their vehicles can be appraised in an auction-like format at the dealership. The bidding audience includes wholesale vehicle purchasers who can be in-store and/or online via a digital platform.  

Bidders indicate how much they’d be willing to pay for each car that’s part of the what’s-your-car-worth events.  

When the bidding is complete, the host dealer has first-refusal rights to buy the vehicle. Otherwise, that option goes to the highest bidder.

“One dealer had 68 vehicles that were bid on,” Barone says. “Instead of one person at the dealership appraising a vehicle, several people are involved. Customers watch the process. It’s a great way to acquire inventory.”

Another novel vehicle-acquisition technique ACV and MAX Digital have implemented is training showroom salespeople to buy private-owner vehicles. It’s something of a role reversal.

“You are paying them not only to sell cars but to buy desirable ones that will sell well and quickly,” Barone says.

A strong inventory is essential to successfully sell used cars. It’s better to stock 50 vehicles that move fast rather than 100, if only half of them turn quickly, Barone says.

That means obtaining vehicles that, among other things, “are the right color and contain the right equipment packages” opposed to garden-variety units from rental fleets, he says.  

Using inventory management software to price them properly also is essential, he says. “The right car priced right is incredible. The right car priced wrong is still the wrong car.”

Steve Finlay is a retired WardsAuto senior editor. He can be reached at [email protected].