Remarketers Tell How to Get Used-Car Inventory Right

Las Vegas — Without the right cars in stock, in sensible quantities, dealerships face a hard task during these turbulent economic times. But which models are the right ones, and how many vehicles constitute a proper inventory?

Participants at the best-practices meeting of the recently formed Pre-Owned Automobile Dealers Alliance came up with ideas to help manage used-vehicle inventory.

Step One: use inventory-management software to assess how the retail and wholesale markets are going.

Computer assistance isn't enough, though. “The analytic side of the business makes all the sense in the world,” says David Pilcher, executive vice-president of National Car Sales. Even so, “you have to have a human judgment tool.”

Inventory is dealers' foremost concern, says Amanda Savage, director of Ove.com, an online auction firm.

“Dealers are still looking for inventory and inventory is out there,” but not necessarily at bargain prices for used vehicles,” she says. Wholesale used-car pricing has been high, but it's declining.

Stronger dealers utilize software tools to select the best inventory, based on local demand for various vehicles, says Sean Seltzer, national business development manager for Kelley Blue Book/CDMdata Inc.

Intuitions about what may or may not sell aren't enough in today's market, he says.

Success today stems from “really making smart buying decisions,” Savage says. That means “knowing as much about the vehicle as you can before you buy it. So, do your homework. Read those condition reports. Contact the owners.” In that regard, “it's back to basics.”

Katherine Decker, vice-president and general manager of Manheim Financial Services, believes a lot of dealers were over-extended. Now, they are able to operate with lower levels of inventory, but each unit costs more.

Chris Little, director of vehicle operations for the 57-store Hendrick Automotive Group based in Charlotte, NC, says dealers hurt themselves if they cut back too much on used-car inventory.

He promotes the use of dual then-and-now pricing to move vehicles.

“Think like a consumer does,' he says. As an example: “If I like a suit that's $1,500, but another is on sale at $995, I'll take the latter.” Similarly, he says, “keep the ‘was’ and ‘now’ prices visible,” especially in Web ads.

“We're really looking hard at the trade-ins because they sell right away,” says Tom Fisher, a North Dakota dealer

Syracuse, NY, dealer Todd Caputo's dealerships are carrying 30% less inventory than before, due in part to the Internet.

“You're selling a virtual inventory, so you don't have to carry as much,” he says.

Caputo also has altered the types of vehicles he sells. A year ago, GMC trucks and Jeep Grand Cherokees were top choices. Now, he is more likely to stock Kia Optimas and Hyundai Santa Fes and Sonatas.

“Look at what the average customer is going through at home,” Pilcher recommends.

If they are going through hard times, they are looking to buy a vehicle with good value, he says. If the question is, “What do I need, and how can I stretch my dollar?” the marketing message should tap into that.