Autosphere: Getting Creative

Hot used vehicle demand requires new strategies to help dealers maximize returns.

Prior to the pandemic, many dealers often had a sizeable stock of vehicles at auction in retail condition to pick from. Today things are different. With the new vehicle shortage putting pressure on used demand, and fewer off-lease and rental units available, a growing appetite for used vehicles and short supply has seen national price averages spike by as much as 13%, according to James Tani, Executive Vice President, Dealer Sales at KAR Global, parent company of ADESA auctions. This means that unlike conditions prior to the pandemic, wholesale vehicles ending up at auction are significantly fewer in number, meaning there’s less choice and often, fewer “retail ready” units to choose from.

As a result, dealers are having to get creative when it comes to finding pre-owned retail stock for their lots. In many cases this means acquiring higher-mileage vehicles that require a greater amount of reconditioning work, and then prepping those units for retail, whether they are traded in directly to the dealership, or come via wholesale channels and auctions.

Highly profitable

“Even without the current market conditions, reconditioning for resale can be an invaluable and highly profitable tactic for dealers,” says Trevor Henderson, COO of ADESA in Canada.

He notes that the auction firm has seen a big increase in demand for reconditioning services, and as a result is investing significantly in its more than 70 Vehicle Logistics Centres across North America.

On the wholesale side, savvy sellers are also investing in reconditioning the units they have, making them more easily marketable. Henderson notes that by employing this strategy, sellers can achieve two objectives—first, they’re able to liquidate them quickly due to high desirability, and second, they get better returns on their reconditioning investment as more dealers compete to purchase them

View the full article on pages 10-11 of the October issue of Autosphere here.

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