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Why Is Acquiring Used Vehicle

Inventory So Hard?

By Mark Gibson, Co-Founder, 1 Click Auto Auction

Many dealers are suffering from the lack
of used vehicle inventory. Consumers
are being forced to gravitate to used
vehicles for multiple reasons: they are less
expensive, plus the manufacturers aren’t
pumping out nearly as many new vehicles
as they are normally depleting available
selection. To add insult to injury, even
if the manufacturers WERE continuing
to produce in quantity as they were pre-
pandemic, margins are so low that dealers
actually PREFER to sell pre-owned
vehicles as they are more profitable.

Stair-step revenue from new vehicle
sales has largely gone by the wayside so
all dealerships are competing with large
companies to acquire pre-owned vehicles.
Even Carvana is being so aggressive at
bidding for used cars at auction that they
are literally bidding against themselves.
units. Dealers who are on mass-auction contacting private parties with offers for
Why not just facilitate used inventory sites are bidding on units that other dealers their vehicles? Not much has changed.
acquisition by bypassing the auctions that think that they can get top dollar for. The Rather than fighting other dealerships
dealers have been relying on for decades? problem is that profitability decreases and overpaying for vehicles which may
By doing so, you pay actual market value with every bid when considering all of the easily end up with low front end potential
for the vehicle rather than get involved in fees. In addition, there are many vehicles profits in order to simply have cars on the
a bidding war just to see that final price out there that another dealer would want lot, investigate easier ways in which to
(which may be what the vehicle is worth) – like that broken laser pointer – that the acquire that inventory without this big “I
inflated through auction fees, etc? selling dealer doesn’t even know about. have more money than you so I will win
no matter what” scenarios that happen
Let’s take a look at a company that perfected Therein lies the beauty of person-to- frequently.
a process and business model that has person sales. The buying dealer gets to
exploded – eBay. An entrepreneur, Pierre decide what is valuable for THEM. What The whole point of sales (especially in
Omidyar, started an auction platform called if there is a person that went into a Ford the auto industry) is to buy low and sell
AuctionWeb. The first sale that was made dealership actually wanting a Ford Pinto high. The trend nowadays seems to be the
was for $14.83 for a broken laser pointer. (yeah, I know, low odds) but, if there were, opposite for the simple reason that dealers
Astonished, Pierre called the buyer and a dealer would be hard pressed to find don’t want empty lots and rely on back-
asked if he realized that the laser pointer one of them at Manheim. However, the end profits.
was broken in which the buyer replied that dealership with a customer for that vehicle
he was aware but collected broken laser may be interested in buying it. In these times, ALL businesses have had to
pointers and that led to the first auction site change their business models to adapt to
that allowed person-to-person transactions. Nobody knows what the market is out the state of the industry (and the world.)
Of course, while this started as a hobby for there except for the vehicles that either My guess is that any dealer who could
Pierre, we all know the powerhouse that move quickly on their lots, are in condition acquire inventory faster, at a lower cost,
(renamed) eBay has become. to become a front-line ready CPO unit, or and retail it with higher front-end profits
simply need used inventory on both the while still having the opportunity for back-
The largest point is that one man’s garbage high end or low-end side. end profits would jump on that. It’s only
could easily be another man’s treasure. logical and, at the end of the day, creates
You could also equate this analogy to the Remember the days when dealers used more revenue in sales which is what every
individuals that buy abandoned storage to comb through the classified ads and dealership wants. n

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