By Jeff Englishmen, VP of Dealer Success at ZeroSum
The global pandemic and related supply chain challenges took a toll on new vehicle inventory in 2021 and 2022, which in turn hit vehicle movement as the market fell to 12.4 million and then 10.2 million. The lack of new vehicle availability in the recent past is now reverberating through today’s used-vehicle market.
In August 2021, more than 70% of used supply at dealerships was six years old or newer. Due to lower lease returns and higher dealer willingness to acquire older vehicles, today that figure is down to just 53.5%. Meanwhile, the percentage of used vehicles that are 10 years or older has doubled to 27%. As a result, the average mileage of a used car in the marketplace has increased by 24%.
Meanwhile, new vehicle inventory has climbed from a post-pandemic low of 800,000 vehicles back to nearly 3 million vehicles. New vehicle availability combined with an older used vehicle supply means used inventory is staying on lots longer. From August 2021 to August 2024, days-on-lot has jumped by 55% over that timeframe.
But dealers can ill-afford to ignore their used vehicle operations. They need to effectively market the used vehicle inventory they have on hand, and make sure it connects with the right prospective buyers.
ZeroSum has identified three strategies to help dealers move the used vehicle inventory that is currently available more effectively:
Target the Right Shoppers
Because today’s used vehicles are older with higher mileage, they are also less costly. This will appeal to a different and more value-conscious customer segment than might have been interested in the higher end used vehicles that existed three years ago. Dealers need to understand the unique demographic characteristics of their market and target their used inventory to the right customer groups.
This means reaching younger customers, lower-income customers, or perhaps families on a tight budget.
Acquire the Right Inventory
With high-quality used vehicles harder to find today, dealers should put more focus on off-brand used vehicles. Rather than wait for the perfect used vehicles to show up on their lots, dealers need to proactively develop acquisition strategies to find better vehicles.
One is to open their pool of potential used vehicles to other brands. While many OEMs have specific targets for the percentage of in-brand vehicles that should make up used vehicle inventory, dealers need to stay open to any low-mileage, high-quality vehicles they can find that are turning well. If that happens to be an off-brand vehicle at auction or from a customer trade, it’s important to add that vehicle to the used inventory mix.
Employ the Right Marketing Tactics
Many dealers focus a significant percentage of their marketing budget on search related tactics. They try to drive in-market shoppers to the dealer website, then count on the customer to find a vehicle they like. The challenge today is that the older model used vehicles might not be top of mind with most customers.
To move these vehicles, dealers need to put more eyeballs on specific vehicles. Shifting budget into video, social media, and display ads allows dealers to increase the visibility of these older vehicles and tout the benefits of them to targeted consumers. These marketing tactics work to match relevant shoppers with available inventory, thus increasing the likelihood of a sale.
Used Vehicle Focus Can Still Drive Profits
Lack of newer model year inventory in the used vehicle market is a significant challenge facing the entire industry. But it doesn’t need to have a destructive impact on used vehicle operations. Small tweaks to efforts in terms targeting, acquisition, and marketing tactics can make the difference between moving metal and watching inventory sit for far too long.
Smart dealers will take a long hard look at their used vehicle strategies. A great first step is to call your ZeroSum Dealer Sales Manager and get started today!