Keys to Used-Vehicle Acquisition in 2021

While Martin Luther King Jr. Day is statistically the best time to buy a used car, four of the other top 10 times to buy a used car, according to studies by iSeeCars, are in December and January, two days of which lie between Christmas Eve and New Year’s Day.

The question is: Will this year’s COVID economy prove any different? And will typical annual trends carry on through 2021?

For dealers, franchised and independent, the used-car market is effectively a stock market. The money you put down on a used vehicle, no matter where it comes from, is like a “deposit slip,” says David Long of Hansel Auto Group.

And in today’s wholesale market, you can’t “underpay for the wrong car or overpay for the right one,” he says.

“It’s just about using the data to make good decisions,” says Long, “and if you do, then you will come out on top.”

How do Long and his team succeed?

For him, it’s all about efficiency. There was a time when Long’s dealer group would carry 800 used cars and would buy and turn them to operate the business with great return and low margins.

“Today that’s just not the case,” Long says, noting it’s so difficult to get vehicles at auction that his dealers have been forced to hyper-focus on vehicle acquisition strategy through private parties, trade efficiency and owner-based marketing.

“We have found that even though our inventory levels are low, our profit levels are as high as they’ve ever been,” he says, “and I really believe that’s because of the pivot we’ve made and realizing how difficult it is to buy a car, price it below the market and be profitable.”

Supply almost undisputedly has been the greater obstacle for many dealers this year. Between the COVID economy and the national elections there remains a lot of uncertainty. And as Jeff Dantzler explains, the last thing you want to do is face a supply issue with uncertainty.

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“Just like I was talking about buyers and their psychology, we need to pay attention to our own psychology,” he says, “and not get ahead of ourselves and think, ‘Hey, we’re selling everything we’re buying, so just go out there and buy, buy, buy’ and not look at things like the data and being conservative enough.”

When asked what he thinks dealers in general should be leery of, Long says: “Dealers with a scarcity mindset are going to rush out and get as many new cars they can possibly get, which is in my mind a bad model. And they’re going to overpay for used cars and they’re going to be in serious trouble.”

The efficiency model of making sure you have, and are paying attention to, the days’ supply by model line each day and paying attention to trim lines has never been more important than it is right now.

Profitability vs. Market Share

Both Long and Dantzler agree the idea of market share can be misleading. And for Dantzler, market share is not unique to new car dealers.

“It’s the human being share that matters,” he says, suggesting it’s not strictly about volume.

Dantzler also points out that profit is most impacted not by market share but by expenses.

“You can make all the profit in the world and over-expense yourself,” he says. “You can talk about market share as much as you want to and not look at your expenses and every line on the statement. But profitability – I mean, every dollar you save is a dollar profit.”

Another idea Dantzler highlights is that market share is security and your sales-to-service process is related because, “Once people start driving, service ends up increasing because they keep their cars.”

Ryan Gerardi, AutoConversion founder-president

Ryan Gerardi (above) is founder and president of AutoConversion, which specializes in B2B and retail solutions for automotive, mobility and transportation companies.