5 Reasons Your Pre-Owned Lot is Underwater & How to Save It

January 6, 2020  |  Jenn Villa

Used car woes are hindering dealerships nationwide, causing a hard hit to profit margins. 

Why are dealers losing big-time on what should be easy money (or at least easier money)? If your pre-owned lot is gasping for air, see if any of this sounds familiar, and then check out some fresh approaches that can get you on the road toward profitability:  

1. Every day your cars are depreciating— and depreciating fast.

Your used cars are sinking underwater, and fast. According to Black Book/ Finch’s report on vehicle depreciation, used cars depreciate by about 15% annually, meaning pre-owned cars sitting on your lot depreciate by close to 1.85% every month and a half. 

Reasons why your used lot is underwater

By the time the average vehicle reaches day 45, it has lost approximately $750 in evaporating water due to depreciation and floorplan interest. By day 90, it's $1,500. 

How CarOffer can help: With CarOffer’s 45-Day Guaranteed Offers, you’ll have the peace of mind knowing that if a vehicle is still on your lot at 45 days, we will buy that vehicle and take it off your hands. It’ll be purchased at an agreed upon original price so you won’t have to worry about taking a major loss.

2. Your competitor has the same pre-owned inventory as you.

When it comes to trade-ins, you’re at the mercy of whatever your new customer is trying to exchange. Before you know it, you’re surrounded by used inventory that won’t sell. Your competitors are often in the same boat. Suddenly, you and your rival dealership are sitting on the same cars. You need a fresh churn of models that customers actually desire in order to stand apart from other dealers.

How CarOffer can help: Use NADA data to see which used vehicles are maintaining their value to achieve the greatest profit. Then, shop for the pre-owned models you want using CarOffer’s buy tool: The Buying Matrix™. Our platform relies on a vast dealer-to-dealer transaction network— granting you instant buying power to over 1.5 million vehicles. With your inventory automatically stocked, you will always have the right vehicles for your target customers. 

3. You can’t get rid of the used cars that nobody wants.

Doesn’t it often feel like the same pre-owned vehicles become fixed features on your lot? The popular models are snatched up quickly, but those hard-to-push units remain. Or, maybe a certain brand or style just isn’t desired in your area. So now, not only do you and your competitors have the same used inventory, but you’re also stuck with those unwanted cars until they sell. 

5 Reasons Your Pre-Owned Lot is Underwater & How to Save It

How CarOffer can help: Not only does our Buying Matrix allow you to buy desirable used inventory, but you can also use our TradeGrade platform to assess vehicles and receive instant offers on your aging inventory. We provide premium offers on vehicles you may have trouble selling and share them with our interested buyer’s network. So, even if you can’t sell those models, someone else in another state will.

4. You’re underpricing your used cars to move them.

After your pre-owned stock sits for so long, you become desperate to move that aging inventory off your lot. Now you’re slashing prices dramatically and decreasing your profit margin. The more you do this, the more you bleed your dealership dry. In fact, last year alone the average dealer lost $2 on every pre-owned vehicle they sold, according to NADA data. You need to move cars at a reasonable price and still profit on your pre-owned stock.

How CarOffer can help: There’s always a National Buyer or fellow dealer who is able to flip a model you can’t. The buyers in our Buying Matrix pay competitive prices for your stock, oftentimes making you much higher offers than you can get moving it off the lot organically. Stop underpricing used cars and get the return you deserve by getting an instant offer for that aging unit today.

5. You’re missing great trades. 

Are you losing incredible trades because you can’t offer the seller the right number? This is a massive problem for many dealerships, and it’s why they only have pre-owned stock that won’t move. Your pre-owned lot needs the vehicles your demographic loves, so it’s critical that you offer a more competitive price for their trade-in.

Car sales

How CarOffer can help: CarOffer gives you the upper hand in price negotiation by taking the guesswork out of the appraisal process. Our TradeGrade™ tool makes it easy to gather the information we need to provide you with an accurate, instant offer based on competitive data, so you never have to watch another prospective customer walk away again.

Try CarOffer for Yourself

Your pre-owned stock can really impact your profit margin

CarOffer’s instant trade platform makes it easier than ever to flip aged or unwanted vehicles. Plus, our 45-day, locked trade-in offer guarantees used inventory turnover to help eliminate your negative equity and put money back into your bottom line.
 

Sign up for a demo today.