Used cars have never been more popular, scarce or expensive.
As a result, the average price of secondhand vehicles has risen 42% over the past two years and now costs close to $30,000, a report from industry pricing platform Kelley Blue Book stated.
Add in an unprecedented rate of online purchases — at both the wholesale and retail levels — and the pace of transactions and increasingly high stakes involved make for a stressful scenario that’s fraught with risk.
“Acquiring inventory is the No. 1 challenge facing dealers today and will be for some time to come,” Dale Pollak, founder of vAuto and executive vice president at parent firm Cox Automotive, said in a press release, noting how high costs and tight supply have forced dealers to adopt a “buy anywhere” approach when trying to acquire vehicles outside their traditional auction and trade-in channels.
“The problem is that this pivot puts dealership appraisers and buyers in unfamiliar territory,” he added in the release. “They must now acquire cars across a wider number of sourcing channels, where opportunities and risks are different, at a time when the market won’t forgive buying the wrong car or paying too much.”
Dealers Dive Into Data
Whether it’s digitally-based auto retailers like CarMax or Carvana, or efforts from manufacturers — like the CarBravo unit launched by General Motors last month — the way we shop for cars and purchase them has changed during the pandemic and is not expected to revert back to the old ways.
Read more: GM Launches Online Used Car Marketplace
Studies have shown that the flexibility of having no constraints over store hours and the absence of pressurized in-dealership haggling over price have made the digital purchase experience of cars and trucks the preferred choice for many consumers.
Amidst that backdrop, Cox Automotive said its data science team has developed and just launched what it called in the release “the industry’s first multichannel inventory sourcing system,” which allows dealers to go beyond auctions and trade-ins for inventory.
“[The Global Acquisition platform uses] data-driven insights about each vehicle’s investment value to recommend an acquisition price and retail asking price at the point of appraisal,” the release stated, noting the system’s objective of helping dealers strategize, analyze and optimize their used vehicle acquisitions profitably across multiple channels.
According to some of the 40,000 Cox Automotive dealer clients who have already begun using the new pricing platform, better data is helping them derive more accurate appraisals while also helping dealers focus on where to acquire vehicles.
“We know we have to be aggressive if we’re buying off the street, and Global Acquisition helps,” said Kelly Summers, general manager for Bill Knight Ford in Tulsa, in the release.
“You can’t make anything on a car if you don’t first buy it and buy it right,” Tim Nelson, general manager of Beaverton Honda added in the release.
The new platform will be officially launched in March at the NADA convention in Las Vegas but is already being piloted and perfected on the front lines by dealerships struggling to intelligently build inventory needed to meet consumer demand.
“As we’ve always said, ‘You make money when you buy a car, not when you sell it,’” said Randy Kobat, vice president of Inventory Management Solutions at Cox Automotive.