Consumers have access to an unprecedented amount of information these days and it can be a challenge to keep your sales team up to speed and equipped to respond to the questions they face every day. A good case in point: used car prices. Consumers are learning that average used-car prices are hitting record highs. They're also hearing that used car inventories are increasing. "But, wait", they say, "if the supply of used vehicles is bigger why are prices going up instead of down?" If your sales team has the right approach to this conundrum, your dealership can profit despite the seeming contradiction.
With used car supplies increasing and average prices going up, some consumers might be confused about this apparent violation of the basic law of supply and demand. To help them understand the current dynamic it's good to remind them that we're all still feeling the effects of the 2009 Great Recession.
The short story goes like this: New-car sales in 2009 topped out at 10.4 million units. Analysts said it was the lowest point for U.S. auto sales per capita since World War II, nearly 3 million units below 2008, and 2008 was almost 3 million units lower than 2007. That huge deficit in new car sales resulted in a corresponding drop in used inventory. As new-car sales have increased, there’s been a gradual increase in the supply of used cars. However, the recent and more significant jump in used inventory contains a disproportionately large number of 3-year-old vehicles coming off of new-car leases. So, while the overall supply has increased, much of that jump has been concentrated in the newer and pricier used cars – those 3-year-old, off-lease cars.
Many of these "nearly new" units end up being retailed as Certified Pre-Owned cars. Most consumers understand the extra costs and benefits associated with CPO programs, but other factors that affect used prices, like the one described above, can be a little more complex and it's always helpful to be able to explain some of the other market dynamics at play. Your customers will appreciate it.
In a recent consumer study, CarSoup.com third-party research found that 7% of customers who bought new actually would have preferred to purchase used. Talk to your CarSoup.com representative about more effective ways to locate used vehicle buyers. Try a used car special event, targeted ad banners, retargeting and other great CarSoup.com tools designed to help you build your brand, increase traffic and drive sales.