It’s been a harsh winter for US auto sales. Some analysts are blaming the record cold weather in February, while others point to more traditional economic factors. Either way, February marked the beginning of the long-expected slow down of the US car market.

February 2019 US Car Sales

You know it’s a bad month when even SUV and truck sales slow down. New cars sales fell to an annualized rate of 16.8 million units in February, down from 17.3 million a year ago.

Sales of the best-selling Jeep Wrangler dropped 5.9% YoY, while analysts estimate Ford sales to fall 4.4% due to slowing sales of F-Series pickups (Ford releases sales numbers quarterly).

Nearly every major manufacturer took a loss in February, including Chrysler Fiat (down 2% YoY), Toyota Motors of North America (down 5.2% YoY), and Honda of America (down 0.4% YoY). Analysts estimate that GM, who also posts sales numbers quarterly, saw a 5.8% YoY drop in sales.

Many believe the record cold weathers – the so-called polar vortex – played a role in slow sales last month, but not all analysts are convinced.

“It’s easy to point fingers at anomalous factors like the polar vortex as the reason for a sales slowdown, but the numbers don’t show that’s the case,” said Jeremy Acevedo, manager of industry analysis at Edmunds. “Record-high interest rates and rising average transaction prices are what’s really putting pressure on the market and keeping car shoppers at bay so far in 2019,”

Despite the effect of cold weather, interest rates are a major factor in slowing sales. The Detroit Bureaureported that the APR for new vehicle financing reached 6.26% in February, compared to 5.19% a year ago. They also found that zero-percent finance deals made up just 3.22% of all offers versus 8.28% last year.

Other factors include the looming threat of Donald Trump’s 25% tariff on foreign vehicles. According to Reuters, “J.D. Power and LMC Automotive have estimated that tariffs could hit full-year demand by as much as 700,000 units.”

Unfortunately, it doesn’t look like February sales are an anomaly. We expect to see the gradual slowdown continue through March, even as winter weather subsides.

Even if sales in March beat this past February, they are unlikely to outpace March 2018, when sales exceeded expectations with an annualized pace of 17.43 million units. It’s hard to imagine a bounce-back like that with the current state in interest rates and political climate.

“Shopping conditions are pretty unfavorable for consumers across the board, and even those with good credit are having trouble finding compelling finance offers,” said Acevedo from Edmunds.

What do slumping new car sales mean for used vehicles? As prices rise for new cars, more buyers are going to look for affordable used inventory. That window of opportunity, however, is also closing. “With fewer cars available as trade-ins or off-lease, the supply of lightly-used cars is also dwindling, which is likely to lead to higher prices for those too,” said Forbes contributor Ed Garston.

With car prices going up and sales trending down, dealers again face a tricky financial situation in March and in the months ahead. Inventory management is as important as ever. Dealers should employ best practices to increase their inventory turnrate.

Of course, surprises can happen at any time. Stay up to date with us every month as we analyze auto sales trends and get you prepared for the road ahead.

Adam Tobias

Co-Owner and COO at DealerCue

To earn top dollar in the automotive industry, you have to offer top products. If you deal with used cars, you know that most of the inventory you stock will need some love before you can present it to a customer.

Auto reconditioning is what transforms banged up trade-ins into cars that customers will love.

The used car market is booming, which is pushing the price of used vehicles higher than ever. To compete with these rising prices and customer expectations, dealers need to invest in better reconditioning practices. Doing so will not only improve a dealer’s profits, but provide the long-term benefit of happy customers.

What is Auto Reconditioning?

No used car, whether bought at auction or through a trade-in, will be immediately ready for retail. Investing a small amount of time and money to fix minor issues can significantly boost a vehicle’s retail value. This is the purpose of reconditioning.

Reconditioning includes, but is not limited to:

• Engine repairs
• Oil and filter changes
• Maintenance on the drivetrain and suspension
• Equipping new brake pads or tires
• Fixing dents, chipped paint, cracked windows
• Buffing out scratches

Auto reconditioning attempts to restore a vehicle to its optimal condition so it can be sold at the maximum price the market will allow.

The Benefits of Auto Reconditioning

Reconditioning ensures buyers leave the lot happy and return with a smile when it’s time to purchase another vehicle. The benefits of reconditioning far outweigh the cost in time and money when done correctly:

• Higher Retail Prices. Reconditioned vehicles can be sold for a higher retail price. There is usually a several thousand dollars variance between vehicles in average condition and those in clean condition. In the VinCue image below, you will see how the same exact type of vehicle is appraised differently based on its condition:

The condition of a vehicle can have a big impact on the market retail value. Source: VinCue

• Faster turn rates. Humans like things that look nice, and the market for fixer-uppers is much smaller than for vehicles ready to drive off the lot. This is why reconditioned vehicles are more likely to find a buyer quickly.
• Offer warranties and certifications. Reconditioning allows your dealership to issue certifications and warranties, which increase consumer trust and satisfaction.

The Cost of Reconditioning

Reconditioning is an investment, but it does not have unlimited returns. The money spent on reconditioning needs to be monitored and compared to the margin you make on each vehicle. It’s essential to accurately appraise a vehicle and factor in reconditioning costs before approving the work.

A good ballpark for reconditioning costs is $1,000. If you designated the vehicle as a retail unit, then anything higher than $1,000 should be subject to review:  

• Is the vehicle in high demand?
• Does it have high mileage?
• Can you sell it quickly enough?

The goal for reconditioning is to restore a vehicle to its maximum retail price while spending the least amount possible. However, this should never come at the cost of quality.

Best practices for auto reconditioning

Cost and speed are the two major considerations when reconditioning vehicles to sell. Time is money, and every day your vehicle goes unlisted while waiting reconditioning is money lost.

Remember the saying: “20% of the effort is responsible for 80% of the result.”

Here are some reconditioning best practices to make sure you put in the right 20% in every vehicle:

1. Optimize Reconditioning Costs. Dealers should constantly root out inefficiencies and excess costs in their reconditioning process. One way to reduce costs is by using quality, non-OEM parts. Dealers should make sure, however, that this doesn’t disqualify them from any certification programs.
2. Fast Turnaround. Complete reconditioning within 3-4 days from acquiring the vehicle. More days in reconditioning means longer turn rates and less gross profit. The optimum period to sell the vehicle is 30 days.
3. Buy better vehicles. Sometimes the best way to reduce reconditioning costs is to buy vehiclesthat need less work. Look for vehicles that are virtually ready to roll off the lot to offset the cars that need extra work.
4. Have a reconditioning team. Don’t make your services team decide between reconditioning a vehicle and working on a customer order. Eliminate this conflict by having a dedicated reconditioning team.
5. Recondition for Wholesale. Some dealers overlook reconditioning for wholesale, but this is a mistake. Dealers are human too, and everyone is more likely to buy a vehicle that is in good shape. Reconditioning a vehicle before auction could help you net a few hundred, even a few thousand dollars more. 

Investing in Reconditioning

Can you afford the investment in reconditioning? The real question is, can you afford not to invest?

Reconditioning used vehicles is an investment that can reap huge dividends for your dealership. When done right, reconditioning can add thousands of dollars to the final selling price, netting you higher profits and happy customers. The benefit is multiplied with every extra vehicle you sell thanks to faster inventory turn rates.

Doing reconditioning the right way takes its own investment of time, education, and tools. Dealers who commit wholeheartedly to improving their reconditioning practices are setting themselves up for success for a long time.

VinCue is a real-time market intelligence tool that helps dealers make better decisions about pricing and car appraisals. It can also help you better understand your inventory. When connected to your DMS, VinCue turns your inventory data into valuable insights for running your dealership.

If you’re new to VinCue, the amount of information it provides can be overwhelming, but even seasoned users can get lost. With so much data available in VinCue, it can be hard to know where to start. 

In this article, we’re going to look at three ways you can get the most out of your vehicle inventory data: 

1. Make better sourcing decisions
2. Find your most valuable vehicles
3. Monitor your dealership health

This guide is designed for VinCue users, but even non-users will find it valuable. The principles for running a successful dealership are the same, no matter what market intelligence tool you use.

Sourcing

VinCue’s appraisal tool is a powerful feature that helps dealers accurately price a trade-in or vehicle at auction. But how do dealers know if they need that vehicle? That’s where inventory data becomes critical.

Dealers need to know how many vehicles they have in stock and which models are overstocked or understocked based on demand. Dealers can find this information in VinCue:

1. Click on My Dealership
2. Click on Used Vehicles in the top navigation bar
3. Click on Stocking

(Note: There is also a quick view of this information on the My Dealership Dashboard)

VinCue breaks down dealer inventory by model and vehicle class

In the dashboard above, dealers can see their inventory broken down by vehicle class. The bar graph at the top shows how many vehicles the dealership has in stock compared to how many they have sold in the past 30 days. Then there is a detailed breakdown of each category below.

For example, we can see that this dealership sold four compact cars last month and has seven in stock, which means the dealership is well-stocked. However, they are short two midsize vehicles because they only have five in stock but sold seven last month.

With this information in hand, dealers can make smarter decisions about which vehicles to buy. When they are ready to source, they can click on a category, view the most popular models, and even bid on them through VinCue.

Competitor Inventory Data

VinCue also lets dealers see what their local competitors are stocking. In a competitive market, it’s important to differentiate from other dealers in the area. This means looking for niches that are underserved in your market.

In VinCue, dealers can view any dealership and see a detailed breakdown of their inventory:

In VinCue, dealers can look up any dealership and see their inventory broken down by price, model, and brand.

Dealers can also look at their competitor’s recent sales, pricing, and inventory age. This will give them valuable information on how to stand out in the eyes of customers.

To view competitor data, simply search for the name of the dealership in the VinCue Search Bar.

Local Sales Trends

Finally, dealers can look at local and regional sales trends to make inventory decisions. To find this information:

1. Click National Markets in the sidebar menu
2. Click your region on the map of the United States
3. Click Inventory

In this view, dealers will see where there are shortages of new and used vehicles, as well as the best-priced vehicles. Dealers can also look at Market Day Supply and Brand Days on Market for models in their area.

Research market day supply on VinCue

With these local sales trends, combined with competitor inventory combined, dealers can find the gaps in the market that translate into big wins for the dealership.

This information changes monthly– even weekly– so the dealers who stay up on the most current data will see the biggest difference in their sourcing.

Find Your Most Valuable Vehicles

Not every vehicle is created equal when it comes to sales. Some cars more valuable to a dealership than others. 

Dealers want to identify their cash crops: the vehicles that are most profitable for their dealership. VinCue provides two metrics that help dealers identify those vehicles: Market Demand and Your Best Selling Vehicles

Market Demand

We talked about market demand in the previous section, but let’s take a closer look. Market demand tells us which vehicles sell best in a given area. Dealers can find this information in VinCue by:

1. Clicking National Markets in the sidebar menu
2. Choosing your region on the map of the United States
3. Clicking Sales

Here, dealers will find the top-selling vehicles in their metro, plus a breakdown of brand market share, top-selling dealerships, and new vs. used vehicle sales.

Dealers want to stock on popular vehicles, but that doesn’t always mean they should stock the mostpopular. The most popular vehicles (The Ford F-150, for example) are also the most competitive. That’s why it’s important to look at your own best selling vehicles as well. 

Your Best Selling Vehicles

Market demand alone isn’t enough to make informed inventory decisions. Dealers should turn back to their own inventory data to see which vehicles are their best-sellers. Dealers can find this by:

1. Clicking on My Dealership in the sidebar menu
2. Clicking on Sales

In this view, dealers can see their top-selling vehicles, weekly sales numbers, and sales by brand market share.

Dealers can identify their top selling vehicles and break down their inventory by brand.

Track weekly sales for new and used vehicles. Compare your sales numbers to the local market

The most valuable vehicles are those with the best combination of market demand and high sales. A third metric, gross margin, is also important. Once you identify your most valuable vehicles, you can double down on your niche. Stock more of your most valuable vehicles and market them more aggressively through online ads. 

Dealership Health

Revenue and profit are valuable metrics, but they aren’t the most important when it comes to dealership health. In fact, these metrics can be downright misleading if a dealer isn’t careful.

Revenue and profit are the results of the underlying health of a dealership. If the dealership is healthy, then revenue and profit will be strong. If the dealership is not, then those metrics will suffer.

VinCue has three features to help dealers keep a close eye on their company’s health: 

1. Inventory turn rate
2. Pricing alerts
3. Dealership report card

Inventory Turn Rate

Inventory turn rate is one of the most important indicators of a dealership’s health. Turn rate is the number of days a vehicle sits on your lot before being sold. Dealers want to keep their inventory as fresh as possible, which means keeping their inventory turn rate low. The ideal turn rate is 30 days.

Dealers can find their inventory turn rate on My Dealership dashboard in VinCue (along with average price age):

Dealers can see a breakdown of their inventory by age.

Dealers can also see the age of individual vehicles:

1. Click on My Dealership
2. Choose Used Vehicles or New Vehicles

If a dealer’s inventory turn rate is too long, it means that something is not right with the business model. Either your prices are too high, your salespeople aren’t closing deals, your marketing is off, or you’re not stocking the right vehicles.

Since inventory turn rates are measured every month, dealers have the chance to correct the issue before it’s too late. 

Pricing Alerts

Thanks to the internet, customers can see the prices of every vehicle in their area. If your listings are considerably higher than your competitors, a customer is going to shop around for a better deal.

With VinCue pricing alerts, dealers are notified when their competitors are offering lower prices:

pricing alerts from VinCue tell you where you stand in your local market

Pricing alerts are found directly on the My Dealership dashboard, and dealers can also be alerted via email.

Dealership Report Card

With so much data available, it’s sometimes nice to get a quick snapshot of your dealership’s health. With the VinCue Report Card, dealers get grades on important metrics:

1. New Market Share. Brand share per market, overall and per model.
2. Used Market Share. Overall market share by segment.
3. New Vehicle Price Ranking. Lowest advertised models and trim levels.
4. New Vehicle Price Age. How long vehicles stay at the same price.
5. Used Vehicle Price Age. Same as above.  
6. Used Inventory Quality. The level of market demand for your used inventory.
7. Missed Deals. The number of customers you lose to other dealers.

The dealership report card gives dealers a snapshot of their overall health

You can find your report card on the righthand side of the VinCue homepage. Dealers can also see a quick glance at their grade in the header.

Dealers shouldn’t wait until the end of the quarter to check their dealership’s health. Inventory data lets us check it daily so you can correct problems as soon as they arise. No dealership is perfect, but the dealers who actively improve will be more successful in the long run.

Getting the Most Out of Inventory Data

Inventory data tells us way more than just how many vehicles we have on the lot. When closely analyzed, dealers can find golden nuggets of information that will help them source better vehicles, sell them more quickly, and make more money off each sale.

VinCue is just one of the many appraisal tools on the market, but it has the most comprehensive data at the best price for dealers. Sign up for a free demo and get the most out of your inventory data.

“You don’t make money when you sell a car; you make money when you buy it.”

If you agree with this statement, then you already understand the importance of accurate used car appraisals. Appraisals are the lifeblood of any used car program because they have the biggest impact on your bottom line.

That’s right– it’s not just retail sales that drive profit; it’s your ability to buy and sell vehicles at the perfect price. To do that, you need a data-driven approach to appraising used vehicles.

The Cost of Poor Car Appraisal

Imagine David pulls onto your lot and wants to trade in his 2015 Volkswagen Jetta. David knows the KBB value of his car is between $13,000 and $15,000. However, based on some scratches on the bumper, you appraise it at $11,500. Hoping to earn more, David drives across the street to your competitor, who appraises the Jetta at $12,900. You lose the deal.

Even more frustrating? If you had properly appraised David’s vehicle, you would have known it was still worth $13,100 despite the scratches. You could have offered David even more than your competitor and still made a profitable deal.

What many dealers fail to realize is that you didn’t just lose one deal from David– you lost two. First, you lost the chance to sell David a new car on the trade-in. Second, you lost a chance to resell his car.

If you lose a lot of deals like this, it could be indicative of inaccurate appraisals. That’s why we track Missed Dealers in VinCue:

If you’re failing in this department, it’s time to rethink your car appraisal strategy. 

Used Car Appraisal Strategy: Optimize for Turn and Margin

A sound car appraisal strategy is based on two metrics: Turn rate and margin. While desired margins may vary, the optimal turn rate for a vehicle is 30 days or less.

Car appraisal strategy can be summarized by this question:

“What price allows me to turn a vehicle in 30 days while giving me the best possible margin?”

To do this consistently, there are several factors to consider.

How to Appraise Used Cars

No matter which tool you use for car appraisal, it’s important to factor in every pricing variable. Whether you’re buying cars at auction or conducting a trade-in, here’s a step-by-step approach to car appraisal:

1. Find the Average Clean Market Price

First, determine the average market price for the vehicle based on make, model, trim, and year. With VinCue, you can find this information in the vehicle directory, by using the search bar, or by looking up the VIN number.

2. Input Odometer and Condition

How much wear and tear does the vehicle have? Be sure to consider the condition and mileage for the vehicle. VinCue will automatically calculate the change in price based on this information.

3. Include Trim Level

Does the vehicle have valuable upgrades, like a navigation system, 4WD, or sun/moonroof?  Some factors have a bigger impact than others. Choose the trim level and VinCue will tell you the added value of each.

4. Get the Real Market Price

We want to optimize our price for a 30-day turn rate. VinCue gives you this exact number: the Real Market Price. This number factors in the clean market price, odometer, condition, and equipment specs. Real Market Price is the highest you can charge and still expect to turn the car in 30 days.

5. Factor in Reconditioning

David’s Jetta had chipped paint on the bumper and needed new tires. Reconditioning costs like this can quickly eat up margin if they aren’t considered. Plug the estimated reconditioning costs into VinCue and it will be factored into the final appraisal price.

6. Set Your Desired Margin

How much do you want to make off this trade-in? Enter your desired margin into VinCue and it will be factored into the appraisal price along with reconditioning costs.

7. Get the Wholesale Appraised Value

Based on the Real Market Price, reconditioning costs, and your desired margin, VinCue will then calculate the Wholesale Appraised Value. This is the optimal price to pay for the trade-in.

Other Important Car Appraisal Factors

Context is everything when it comes to winning the used car appraisal game. Specifically, what is going on in your market, your city, or with your competitors next door? VinCue wants to arm you with the all the data you need to make the best decisions. Here are other important factors to consider when appraising used vehicles:

Compare Similar Vehicles

Want to know how your pricing compares to the competition? VinCue will let you see prices and turn rates of similar vehicles in the area. This gives you the assurance that your pricing is competitive.

Turn, Supply, and Volume Rates

Some vehicles are just hotter than others. VinCue lets you see the average turn rate, volume, and market supply of a vehicle before making an offer.

Most Attractive Features

David’s 2015 Jetta has a higher than average turn rate, but the diesel version of the Jetta has a below average rate. Other cars turn faster with 4WD or a sunroof. Appraising a vehicle at the equipment level helps you find hidden gems and avoid landmines.

Accurate Car Appraisals Make All the Difference

As the lifeblood of your used car program, we cannot put enough emphasis on the importance of accurate car appraisal. Not only does it help you meet your desired margins, but it also helps you close more deals (which can actually be two deals in one).

VinCue makes it easy to determine the optimal price point for maximizing margin and turn rate. Moreover, it gives you all the information you need to judge appraisals for yourself and make the best decision.