How to Survive the Used Car Burst: 3 Essential Tips

by | Jul 28, 2021

Dealers everywhere saw record-breaking sales and profits over the past few months, resulting in a mass inventory issue nationwide. The lack of inventory issue was driven not only by the chip shortage, but also by lenders essentially being yes-men. We all know the story of 2009, where lenders said yes to mortgages and then subsequently bet on them to default, knowing that they would not be able to afford them. That same exact bubble is brewing in the used car industry, ready to burst soon. Leases and car loans are being given out at rates that people are running 90 day delinquencies on. Repos and collections are waiting to occur on new cars, causing them to turn used to be re-sold at overpriced value. 

There is more to this bubble as well: used car price inflation. Due to inventory being low and demand for cars being high, auctions raised their prices up to $3000-5000 over regular car value. Dealers are now sitting with cars on lots far over their value, waiting to sell to make their money back from overpaying at the auction. With these two factors combined, the used car bubble expanded unfathomably, and is now itching to burst. 

Don’t allow your dealership to fall victim to the impending fall of the used car market. Thanks to Ziegler, we’ve collected tips for you to keep your dealership afloat and thriving in this unnerving times.

1. Keep Marketing. 

Marketing is an essential part of sales for your dealership. Though you think you may be selling well now, it is only from the work of all your team, including your marketing agency. To quote the great Ziegler himself on the necessity of marketing, “Your dealership needs to be constantly visible and out-front in everyone’s mind.” Not only does marketing help drive customers to your storefront, but it keeps your brand image alive and in potential customers’ thoughts. Knowing that a dealership is reputable is essential to trust in a customer’s mind, so keeping your name out there for when that customer is ready to start looking for a vehicle, your dealership will be their first stop. There’s no need to stop advertising; just ensure you’re making the right decisions as to who you’re advertising with! 

2. The 60 Day Rule.

Get rid of old inventory. The longer a used vehicle sits on your lot, the more expensive the loss will be when the bubble ultimately bursts. Ziegler states that he follows a strict 60 day rule – if a car sits on the lot past 60 days, get rid of it. It’ll lessen the burden on your dealership and make room for bigger and better vehicles that will sell.

3. Keep Selling.

Don’t stop what you’re doing. Make sure you keep your employees’ morale at a high and present them with meaningful projects to work on. Ultimately the goal of your dealership is to sell, so there’s no time like the present to fortify your selling strategy no matter what the market turns to. By staying up to date with the market conditions and hyping your team up, selling and success is inevitable.

It is vital to always be on the lookout for upcoming changes to the market to best prepare your dealership. Specific targeting for vehicles and special audiences are our specialty that can help you quell any woes in the used car market.

Credit to James A. Ziegler, CSP, HSG, for article inspiration. Check out his article here. used car burst