With the end of the year rapidly approaching, many dealers are preparing for 2021. Navigating the shortage of new vehicles and restocking near-empty dealership lots will likely be among the many priorities.

While the simplest solution is to turn to the used-vehicle market, it too, has seen its fair share of struggles. Lease extensions, fewer trade-ins and spring auction shutdowns have contributed to low inventory across the board. But with the automotive market rebounding, the used-vehicle market is positioned to make a return and will be a viable option for dealers looking to boost inventory.  

Let’s remember, for all the fanfare that new vehicle sales receive, used vehicles are overwhelmingly the option most consumers choose. According to Experian’s Q2 2020 Market Trends Review, there were more than 18 million used-vehicle registrations through the second quarter.

By comparison, there were only 6.4 million new-vehicle registrations during the same period. And while new registrations naturally are lower than used, new registrations during the quarter were roughly 24% lower than a year ago. Meanwhile, used registrations took less of a hit, declining around 16%. Add to that, we’ve observed more consumers shifting into the used-vehicle market over the past few quarters, mainly to find more cost-effective options.

Create an inventory game plan

With the used-vehicle market rebounding more quickly, some dealers might feel an urgent need to fill inventory but moving forward without a plan can be costly and impact sales goals in the long run. Dealers must be vigilant when choosing vehicles to add to their inventory.

They not only need to ensure they are making a good financial investment in the vehicles they purchase, but also that they are providing car buyers with safe, reliable options that build trust and loyalty between the car buyer and the dealership. They should leverage vehicle history reports as a critical tool to inform decision making throughout the used-car buying process.

Know the value before purchasing

Auctions remain a crucial inventory source for dealers. And depending on the dealership’s location, the opportunity could be substantial. According to Experian’s Automotive Market Insights dashboard, since Sept. 1, there have been 128,900 vehicles at auction in the East region and 126,000 vehicles at auction in the Central region.

By comparison, in April and May, there were only 113,600 vehicles at auction in the East region and 111,000 in the Central region. But with that many vehicles up for auction, dealers need to be overly cautious and prepared — they can’t afford to buy a vehicle with any hidden defects.   

Before bringing inventory back to their dealerships, its crucial for dealers to check the history of the vehicles they are considering purchasing at auction to ensure that the value of the vehicle is worth the investment. It may seem simple, but during these challenging times, it can be an easy oversight.

According to Experian research, four out of 10 cars and light-duty trucks on the road have been in an accident, meaning there are more than 110 million vehicles on the road that have been in an accident. Additionally, over 20% of those vehicles have been in multiple accidents. 

What does this mean for the value of the vehicle? Any vehicle, even if repaired, can lose value if it’s been involved in an accident; which is known as diminished value. According to the Mitchell Industry Trends Auto Physical Damage Report, in Q2 2019, the average diminished value for a vehicle involved in an accident was $3,151. This does not take in to account other damage that can also impact the value of a vehicle, such as flood damage.

Vehicle history reports can help dealers better understand the vehicle they’re buying at auction and identify any hidden problems that could otherwise make the vehicle a bad investment.

Meeting consumer needs in a trustworthy and transparent Way

Beyond improving inventory, dealers need to be prepared to meet the differing needs of car buyers, many of whom are emerging from an uncertain time themselves. Making a vehicle investment, particularly now, will be a tall task for some consumers.

Car buyers want to know that they are getting their money’s worth when purchasing a vehicle, and that it will be reliable for years to come. Dealers can help take the guesswork out of buying a used car by presenting a detailed background of the vehicle’s history — this is especially critical in a time where it may be difficult for some consumers to view the car in person.

In doing so, dealers uphold their own standard of transparency with car buyers and ensure a better return on investment by equipping consumers with the information they need in order to make an informed purchase. More importantly, dealers will build trust with consumers, as well as long-term loyalty.

2021 will bring new challenges to the automotive industry. With opportunity emerging within the used-vehicle market, it’s more important than ever for dealers to leverage vehicle history reports. Not only valuable when rebuilding inventory, the added information will go a long way in establishing trust and loyalty with prospective car shoppers. While a basic tool, vehicle history reports provide dealers with insights that will help them recover from the pandemic and move forward in the new year. 

 

Kirsten Von Busch is Experian’s senior product manager of AutoCheck