LAS VEGAS – Auto dealers are using novel ways to restock their used-car lots at a time of high demand but low supplies of pre-owned vehicles.
The procurement efforts are called “mining” for used cars, an activity that requires innovation rather than excavation.
Auction lanes remain mainstays of used-car inventory sources. But many dealers now scout their service lanes for customers who might agree to sell their vehicles brought in for repairs and maintenance.
“We created a process of using our service lanes to target potential inventory acquisitions,” says Ed French, recently retired chief operating officer for the 4-dealership Community Automotive Group in Indiana.
The company offers to appraise service customers’ cars. It gives bonuses to service advisors who facilitate the purchase of such vehicles. “We have signs that say something like, ‘Before you pay your service bill, you might want to find out the value of your car,’” French says.
That message may appeal to car owners “trying to figure out how to pay a $1,500 repair bill,” he tells the 2011 National Remarketing Conference here. “We’re getting 10-12 cars a week out of our service drives. It’s a massive opportunity. You have many more shots at acquiring vehicles.”
The Community Automotive dealership group also looks for people selling personal vehicles through classified ads and the like. Private-party or so-called “casual” sales accounted for 11.1 million of the 36.9 million used vehicles sold in 2010, according to Manheim Consulting.
“We’ve created the job of inventory-acquisition managers, and worked hard on casual sales,” French says. “A lot of people selling their cars don’t look at dealers as potential customers. They think that route is complicated. We’ve used things such as online appraisals to make it easy to sell to us.”
Some dealerships make trade-in deals more appealing in an effort to replenish their used-car lots.
“If you have a vehicle to trade in, you essentially have a deal,” says Steve Strickland, pre-owned sales manager at Hendrick BMW in Charlotte, NC. “We spiff people in the store who make those deals happen, including service writers.”
To speed up inventory turn rates, the 66-store Hendrick Automotive Group moves acquired trade-in vehicles from one store to another if they aren’t sold within 30 days at their original locations.
“We get 10% of our inventory from other stores,” Stickland says. “We are grabbing inventory that a couple of years ago we weren’t interested in.”
With the used-car market as hot as it is, a typical dealership used-car manager will spend two to three hours a day on inventory procurement, says Chad Lemieux, corporate used-car director for the CAR Group, a dealership management firm.
“We’re spending a lot of time pursuing customers in the service lanes. We are trying different resources,” he says. In today’s market, “if you have the car, you have the sale.”
At a time when “getting inventory is getting very difficult,” AutoNation, the largest dealership chain in the U.S., maintains lists of pre-owned vehicles it is most interested in obtaining, says Danny Papakalos, the firm’s corporate used-car director.
“We look at vehicles coming in to our service department,” he says. “If they match what’s on our buying list, we talk to the customers and give them appraisals.”
AutoNation uses its dealership websites to buy used cars. “We have two lots,” Papakalos says. “One is the real lot where it’s assumed people will trade in vehicles. The second is our virtual lot. People submitting Internet leads have potential trade-ins, too.”
Internet sales managers might show little interest in trade-ins, he says. But used-car managers want them for restocking. “We can use the Internet not only to sell a car, but to buy a car.”
Car mining comes with risks, though.
“We’ve had customers cash out on a sale to us, and the next day the repo guy shows up looking for the car,” French says.
