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Amy Taggart

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How Are You Riding the Used Car Wave?

 

I spend a good amount of my time keeping tabs on the automotive industry for obvious reasons - reading RSS feeds (Google Reader, if you're wondering), newsletters, and dealer forums, among other things. It's been an eventful week from that perspective, full of acquisitions (VinSolutions/ATC, anyone?) and analysis.

One thing I was excited to see yesterday was the infographic from TKCarsites that JD Rucker posted on this site, "The Death and Rebirth of the Automotive Industry". We've all seen some of these numbers, but nothing communicates information more effectively than a great graphic. Give me a chart or graph over a table any day.

But what does this data tell us?

It supports what I've been reading in other places around the web, that sales volume is starting to pick up and give car dealers around the country hope that 2011 will be the end of the doldrums.

There's another factor here that can undermine the sunshine and rainbows, though. Due to some unique market conditions created by a combination of the Cash for Clunkers program and the Japanese natural disaster in March, the number of dealers looking for used cars at the auctions has jumped while supply has tightened. Small used cars in particular are continuing to creep up, according to the May 2011 NADA Used Car Guide.

And as a result, as Dale Pollak noted in an article on Auto Remarketing - "there's at least a chance that we might be at the top of a frothy used-car market, perhaps one that might even be characterized as a bubble."

Which naturally means that at some point used car prices are going to go down, fast.

Right now, consumer demand for used cars is still strong even as wholesales prices are rising, making it more important than ever for dealers to keep their inventory turning over to stay ahead of market conditions.

My question to all of you auto dealers out there is this: what are your plans to drive sales leads and increase your lot traffic to take advantage of your inventory on hand and the jump in used car retail prices?

Are you going "be very cautious about buying at this moment and very aggressive about selling" as Pollak suggests?

How are you riding the used car wave, right now, as it moves to its crest? And what will you do to get out of the way when it breaks?

 

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