by Terry MacCauley - Posted 2 months ago
The used car market is experiencing a significant shift, with prices dropping steadily. For dealers, this presents both challenges and opportunities. As we delve into the factors driving this trend, it becomes clear that swift, strategic action is essential to capitalize on the current market conditions. In this blog, we'll explore the causes behind the falling prices and outline actionable advertising plans to help dealers move their used inventory effectively.
Several key factors are contributing to the decline in used car prices:
Increased New Car Production: After a period of supply chain disruptions, new car production is ramping up. As more new cars become available, the demand for used vehicles diminishes, putting downward pressure on prices.
Rising Interest Rates: Higher interest rates make financing more expensive for consumers. This can lead to decreased demand for all vehicles, but used cars are often more affected as buyers look for better deals or hold off on purchases altogether.
Economic Uncertainty: With economic uncertainties lingering, consumers are becoming more cautious about spending. This cautious approach is slowing down the automotive market, affecting both new and used car sales.
Increased Supply of Off-Lease Vehicles: Many leases that were extended during the pandemic are now ending, resulting in an influx of off-lease vehicles into the market. This increased supply contributes to the downward pressure on prices.
Given the current trends, it's crucial for dealers to act quickly to move their existing used inventory. Holding onto these vehicles for too long can result in further depreciation, impacting profitability. Here are some key strategies dealers can implement:
Aggressive Pricing Strategies: Reevaluate pricing strategies to ensure competitiveness. Offering attractive pricing can help draw in price-sensitive buyers who are looking for good deals.
Enhanced Online Presence: With more consumers shopping online, ensuring your dealership's online presence is strong is vital. High-quality photos, detailed descriptions, and virtual tours can make your listings stand out.
Special Promotions and Incentives: To entice buyers, consider running special promotions or offering incentives such as extended warranties, free maintenance packages, or low-interest financing.
Targeted Advertising Campaigns: Utilize targeted advertising campaigns to reach potential buyers. Highlight the urgency of the situation, emphasizing that now is the best time to buy before prices drop further.
In June, Manheim's Three-Year-Old Index, which tracks the value of wholesale used vehicles, saw a 1.5% decrease from the previous month. Normally, during this time of year, we only see about a 0.5% drop. The main reasons for this larger-than-usual decline are higher new car inventories, increased factory incentives, and falling new car prices.
Looking ahead, the first quarter of next year will be particularly significant. This period marks the three-year lease cycle for vehicles produced in greater numbers post-Covid. As these leases end, we will see a substantial influx of off-lease vehicles, adding to an already crowded market. Captives have adjusted the buyout prices of these vehicles, which will impact the market further.
Over the 4th of July weekend in 2023, the best-selling vehicles included:
However, this year's sales landscape is expected to change. Due to their high prices, sales of large pickup trucks have been steadily declining. We anticipate that smaller pickups, like the Ford Maverick, and compact SUVs will dominate this year's market.
To effectively move used inventory, dealers need a robust advertising strategy that resonates with potential buyers. Here are some actionable steps to consider:
Leverage Social Media: Utilize platforms like Facebook, Instagram, and TikTok to showcase your inventory. Create engaging content highlighting the benefits of buying now, such as "Why Now is the Best Time to Buy a Used Car."
Email Marketing: Send targeted email campaigns to your customer database. Include special offers, highlight the urgency to buy now, and provide detailed information on your current inventory.
Local SEO Optimization: Ensure your dealership's website is optimized for local search. Use keywords related to used car sales in your area and keep your Google My Business profile current.
Collaborate with Influencers: Partner with local influencers or automotive bloggers to reach a wider audience. Their endorsements can build trust and drive traffic to your dealership.
Traditional Advertising: Avoid traditional advertising methods like radio, TV, and print. Tailor your message to highlight the current market conditions and the urgency to buy now.
The decline in used car prices also holds particular significance for Buy Here Pay Here (BHPH) dealers. These dealers cater to customers with less-than-perfect credit, offering in-house financing. The current market conditions provide BHPH dealers with an opportunity to expand their inventory at lower prices, potentially increasing their profit margins.
However, BHPH dealers must also act swiftly to avoid depreciation losses. Offering attractive financing terms, maintaining a strong online presence, and leveraging targeted advertising can help BHPH dealers move their inventory quickly and efficiently.
The decline in used car prices presents a unique challenge for dealers, but with the right strategies, it can also be an opportunity to move inventory efficiently and maintain profitability. By understanding the factors at play and implementing targeted advertising plans, dealers can navigate this market shift successfully. The key is to act quickly, stay competitive, and communicate effectively with potential buyers. Now more than ever, it's essential to let consumers know that your inventory is ready to sell, and there has never been a better time to buy.
-Terry MacCauley, Founder & CEO
We're thrilled to announce that Big Time Advertising will again be at the GIADA Convention & Expo this Thursday and Friday.
We look forward to connecting with all the independent dealers in Georgia. Join us for some fun at Casino Night on Thursday, and be sure to visit us at booth #20 on Friday during the Trade Expo & Dinner from 5 PM to 9 PM.
We know booths can sometimes be hard to find, so look for our signature Orange and Blue colors and our purple BHPH United Summit banner. Plus, while you are there, inquire about how you can receive our signature Marketing Analysis of your entire digital marketing footprint, valued at up to $4,500, absolutely free of charge with no pressure to do anything.
Supporting state associations is incredibly important to us, and we’re proud to invest our talents and energy into helping all the great independent dealers. We can't wait to see everyone there!
