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While looking over an upcoming conference agenda, I noticed a bullet point on a speaker’s agenda: Winning pricing strategies -avoiding the death spiral of pricing to market average.
This is a real concern, and one I address every day. The concern is that if everyone rushes to be a little more competitive, there will be no gross left in your used cars. One dealer after another will participate in a race to the bottom.
The truth is the used car market is much more dynamic, with lots more moving parts, than this simplistic view represents.
The Real Used Car Death Spiral comes from reduced traffic due to over-pricing. The higher you price the less traffic you generate. Then you feel that you must have a higher mark-up per car and make more gross per deal to make up for the short-fall… and you get even less traffic. Or you hide costs to the consumer in your advertising and eventually destroy your reputation… and you get even less traffic.
Make no mistake, living in the past is no way to succeed in the future.