Some Car Dealers Are Pricing TOO LOW

As we transition from the end of 2022 into the beginning of 2023, the used car market is undergoing a significant transformation. With an influx of inventory and a noticeable drop in book values, both dealerships and consumers find themselves facing a unique opportunity. In this article, we’ll explore insights from Auto Marketing Variable Management that shed light on the changing dynamics of the used car market and how consumers can leverage this to their advantage.

Distressed Inventory: Unraveling the Mystery

One key aspect that plays a pivotal role in this evolving market is distressed inventory. But what exactly does distressed inventory mean for both dealerships and consumers? Distressed inventory refers to vehicles that have lingered on the dealership lot for an extended period—30 to 45 days or more. The reasons for this aging could vary, from market shifts to undesirable features of the vehicle. Dealerships often term such vehicles as “left-handed,” indicating their lack of popularity among potential buyers.

Solving the Distressed Inventory Dilemma

For dealerships, the solution is often to discount these vehicles, making them more enticing to buyers. However, the challenge lies in not letting the inventory sit for too long, as aged inventory can become a significant problem. On the consumer side, recognizing distressed inventory becomes crucial. If a vehicle has been on the lot for an extended period, it’s essential to scrutinize the reasons behind it and ensure that any discounts offered are reasonable.

Pricing Pitfalls: When Desirable Cars Are Undervalued

In the quest to manage distressed inventory, some dealerships inadvertently price profitable inventory too low. The focus on quick sales sometimes leads to undervaluing vehicles that are highly desirable. This presents an excellent opportunity for consumers to find high-value cars at surprisingly low prices.

Consumer Strategies: Widening the Scope

As a consumer, navigating this market shift requires strategic thinking. Instead of fixating on a specific model or trim, consider widening your range. For example, if you’re eyeing a particular Ford Explorer, explore different models within your budget. You might find a dealership accidentally pricing an XLT model similarly to an XL model, offering you a golden opportunity.

Patience Pays Off

The key to capitalizing on pricing errors is patience. Keep an eye on the market, watch for discrepancies, and resist the urge to jump on the first attractive deal. Dealerships, like any other entity, can make mistakes, and all it takes is one oversight for consumers to benefit.

Geographical Range: Expanding Your Options

To enhance your chances of finding a great deal, consider widening your geographical range. Searching for cars within a broader radius, say 50 to 100 miles, might lead you to hidden gems that perfectly align with your preferences.

Dealer Insights: A Two-Way Street

For dealerships, staying vigilant about market trends is equally important. Balancing the need to move distressed inventory quickly with pricing vehicles appropriately is a delicate dance. Keeping a keen eye on the market and regularly checking inventory against market values ensures that dealers don’t miss out on potential profits.

In conclusion, the evolving used car market in 2023 offers both challenges and opportunities for consumers and dealerships alike. As a consumer, strategic thinking, patience, and a willingness to explore a broader range can lead to incredible deals on highly desirable vehicles. For dealerships, maintaining a balance between swift inventory turnover and accurate pricing is crucial for long-term success in this dynamic market.

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