Inventory carryover risks are a major challenge for dealers and slashing prices might not be the best (and certainly not the only) remedy, according to a recent survey and analysis from Lotlinx.

Dealers would be wise to tap into artificial intelligence and other advanced technologies, the company said in the analysis around its latest Inventory Carryover Trend Report.

“Despite the availability of advanced technological solutions, many dealerships are still challenged by outdated inventory risk practices that exacerbate their struggles,” Lotlinx said in a news release.

“One of the most pressing issues is the failure to properly manage inventory carryover risk levels, coupled with an underutilization of sophisticated technologies like artificial intelligence (AI) that are available to modernize these new inventory strategies,” it noted.

When asked to rank the challenges they faced with inventory carryover, 56.4% of dealers surveyed pointed to difficulties in moving older models as the No. 1 challenge.

Meanwhile, 36.6% cited limited dealership space, 5.9% cited increased holding costs and 1% listed OEM incentives misalignment.

Increased holding costs was listed as the No. 2 challenge by 55.5% of the dealers, and consumer preference for newer models was listed as the No. 3 challenge by 59.4%.

“The challenges faced by today’s auto dealers in managing inventory carryover risk levels are compounded by outdated practices and underutilization of advanced technology,” Lotlinx CEO Jason Knight said.

Markdowns may not be as effective as some think, Lotlinx said, noting that a third a dealers found that markdowns increased VDP views just 25% of the time. What’s more a fifth (19%) said markdowns don’t ever lead to an increase in VDP views on specific vehicles.

“There is also a disconnect in dealers’ perceptions of the effectiveness of AI on inventory carryover risk and markdown strategies, and the way dealers are currently leveraging tools such as AI,” Lotlinx said.

While 46% of respondents believe AI will impact their store the most for inventory management in the near future, just 9% are using it to manage markdowns better, the company said.

“By embracing AI and other sophisticated tools, dealerships can completely modernize their inventory strategies, reduce risks, and enhance profitability,” Knight said. “The journey toward modernizing inventory management may be complex, but the rewards of increased efficiency, reduced costs, and improved customer satisfaction make it a worthwhile endeavor.

“As the industry continues to evolve, dealerships that adapt and innovate will be best positioned to thrive in the dynamic world of automotive retail.”