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Sean Reyes

Sean Reyes Chief Marketing Officer

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The Ramifications of Price Increases

Dealerships are having a tough time acquiring used vehicle inventory at competitive prices right now. Due to recent OEM shutdowns, new car models are sparse. And, even with large rebates, incentives, and low interest rates, consumers are being especially careful with their finances in these tumultuous times and are shopping for used vehicles more than ever before.

To compound the problem, dealers find themselves overpaying for inventory through traditional auctions and then have to pass those high prices and the various auction fees that go along with them onto the consumer. Not only that, but they also have to trust the vehicle’s condition as it is presented to them – all in the name of having a healthy volume of inventory available for those consumers who are shopping.

A recent article, based on research published by the Department of Labor, indicates that the cost of living has increased and credits “used car prices for the increase.” While the market dictates supply and demand, as it would at any time, right now the market is increasingly challenging for both dealers and consumers. On the one side, you have dealers trying to keep a well-stocked inventory. And on the other, consumers are finding used cars more expensive than ever before.

Dealers are forced to trust auction inspectors to accurately represent the vehicle condition. I heard about a dealer who recently purchased a vehicle for their front-line inventory from a well-known auction company. In the pictures and description, it looked like a desirable vehicle. However, when the dealer received it there was a Confederate flag etched into the rear window. Not a sticker, mind you but etched into the glass. This dealer would have to replace the whole rear window to make it desirable at a considerable expense.

Dealers are turning inventory faster than ever for the simple fact that there is less inventory. Even with the cost of used car prices being blamed for cost of living increases, the fact remains that there are plenty of consumers out there that not only want new (or new to them) vehicles but may actually NEED them.

The Catch-22 here is that some dealers may be so focused on inventory turn they might neglect safety issues before selling the vehicle, especially in the current climate where they are paying higher than normal values simply to have inventory on their lots.

We are certainly in difficult times. Dealers – just like any other business – have the right, but also the need to be profitable. Consumers still need vehicles and want to buy them. But there is an ethical dilemma this situation presents. Do you flip a car quickly that may be unsafe for the buyer or ensure that all vehicles sold are safe?  Remember, selling a pre-owned vehicle with an open recall, while legal, does not protect a dealer from state product liability laws and a wrongful death lawsuit should an accident occur as a direct result of the defect. 

Gross profit is vital, but so is the safety of the consumer. Finding a balance between the two in these times will enhance your dealership’s reputation, customer confidence, and, ultimately, earn loyalty and return business. As well as protect your dealership from those costly lawsuits.

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