CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
Gas prices, inventory and parts shortages are going to take car sales back to the basics. We are already seeing a decrease in incentives from the manufacturers as we have started to see this month as most of the plants in the US are on limited schedules due to parts shortages coming in from Japan including some of the domestic manufacturer plants. Salespeople are going to have to get back to selling themselves, the dealership, and the product and not deep discounts and special A.P.R.'s.
Dealers won't be able to offer the discounts just due to Economics 101; the basics of supply and demand. A lot of the Honda, Toyota, and Nissan dealers are really starting to see the ripple effect that is showing in their inventory levels right now and in the coming months and will really see the effects of the earthquake in the coming months. Some of the domestic makes are starting to see it also as a result of the earthquakes. Dealers have to get creative in the coming months to stay afloat with new car inventory levels being as low as they will be. The salespeople will have to start selling out of stock more and more and not be able to rely on other dealers' inventories for dealer trades.
Fuel prices are also going to affect the used car market on used SUVs and some of the more fuel efficient vehicles. Most dealers are going to be conservative on their trade values on the 'gas guzzlers' just due to the fact that gas may be pushing $6 a gallon according to some reports. Everyone is going to want to be dumping their SUVs for something more fuel efficient to lower their outgoing cash flow. Auction acquisition costs are going to go up on all of the fuel efficient vehicles just due to the gas costs and new car inventory levels being lower than normal.
Back to sales 101. We as salespeople will have to hold our ground a little more than previous years. The supply won't be there to do dealer locates for the customer. If the customer wants a red one and all you have is pink, well, you will have to sell the benefits of the pink one that you have in stock. You wont have other dealers' inventory in your back pocket and we won't be able to offer the discounts that have been available since the factory won't be supporting us as much with factory incentives since the inventory levels will be lower than normal.
When a customer is wanting to trade their gas guzzler, they have to take everything into consideration; the total cost of ownership. I am guessing that the online trade-in tools like kbb, edmunds, and Autotrader Trade-in Market Place aren't caught up with the market with as fast as gas is going up. The customer has to realize that and take into consideration the gas savings that he or she will be getting with the new vehicle that they are looking at. Break out a spread sheet and show gas savings on paper their gas savings. Of course they know in their head they will save money, but put it on paper and it has a much stronger affect on people when they see the actual savings. In some cases, they may be able to save enough money with moving to something more efficient and keep their gas guzzler for when they need it.
If there is one thing that all of you must start doing and that is building up your used car inventory. We are not sure what 2011 will bring with regards to the production of new vehicle inventory, so in case, production is not what we will hope it is, and your used inventory will play a large part in your dealership's profitability. Be conservative on this gas guzzlers and be aggressive on the fuel efficient cars since you won't be able to buy them at auctions. Work your CRM and when you need a certain car, search your CRM and call those customers that have them and try to get them in something new that you have in stock and get that used car for your lot. Also, look at the newspaper just like the old days and also look at the online ads. Most of those people are just looking to sell their vehicle. Another option is to call other dealerships that are carrying something that you specialize in. A Ford dealer may not do well with Chrysler product and visa versa. You also may want to consider spiffing the salespeople for tracking vehicles down for your used car inventory.
I think the coming months with shortage of inventory is going to bring the cream to the top in sales professionals and dealerships. The salespeople that are mining their database and finding their customers that are ready to trade whether they know it or not and selling the trade to the customer in front of them are going to be the successful ones. There will still be the walk in traffic, but they will have to work hard through the inventory issues and get their selling shoes on. Sales Managers will have to count on the most successful salespeople to get the inventory they need. Now is the time to make it happen. Sell yourself, the dealership, and what you have in stock.