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    April 17, 2023

    Streamlining the Vehicle Acquisition Process

    The vehicle acquisition process has traditionally been tedious, timely, and manual. We’ve seen a used vehicle shortage come into play during the last few years that has reduced the amount of stock on dealership lots, causing less-than-ideal customer experiences. This is causing dealers to seek out modern, proactive ways to source and buy their best-selling vehicles. 

    In part one of this two-part blog series, we explore how dealers have traditionally acquired vehicles and the flaws and challenges that can arise during the vehicle acquisition process. Part two uncovers the complex decisions dealers must make during this process, as well as how dealerships can simplify and streamline vehicle acquisition through innovative tools and technology.

    The Traditional Vehicle Acquisition Process
    Historically, there have been three main channels that dealers go through to acquire used vehicles. 

    Direct From Consumer

    Buying directly from consumers has traditionally been one of the main ways dealers acquire used inventory. This could be through in-person trade-ins from customers that bring vehicles to dealerships or encouraging individuals to click a link on the dealer website to sell their vehicle. Many dealers have also invested in dedicated buying channels built out to entice sellers to offload their vehicles, even if they don’t buy one in return. But for the most part, buying directly from consumers has been done through dealers appraising customer trade-ins. 

    Private Dealer-Only Auctions

    Another one of the main ways that dealers have historically purchased vehicles is through private, dealer-only auctions. This includes financing vehicles from banks, financial institutions, or auto manufacturers' financing, often called “floorplan financing”. Auctions can be competitive, lack vehicle information, and may not have the exact inventory a dealership is looking for. Within these private, dealer-only options is also purchasing vehicles from other dealers. When dealers go this route, the vehicles they acquire could be trade-ins or aged inventory that the dealership is trying to offload. 

    Wholesale or Dealer Trades

    There’s an entire industry of buyers who go knocking on dealership doors and ask if they have vehicles they want to sell. These buyers show up, acquire vehicles from dealers, and dispose of them in an efficient way. This lets dealers sell a few more cars and allows them to get inventory out of their system. Alternatively, many large dealerships have rules set in place when vehicles hit a certain age. Once this happens, a dealership will trade or offload these vehicles to sister stores operating within the same network. This keeps the inventory within the same ecosystem instead of giving it to a competitor, although they usually have to reprice the vehicles because the market has likely changed in that time span.

    The processes we’ve mentioned above are what dealerships have historically had to do to find and acquire used inventory. Unfortunately, these options can be clunky, unreliable, and inconsistent.

    Identifying Flaws In Your Customer Acquisition Process
    Let’s switch gears for a minute and look at this process from the point of view of the customer. 

    From a customer acquisition standpoint, customers want the fastest, most efficient offer they can get. They don’t want to have to go through submitting a bunch of information just for a representative to tell them they’ll follow up with a number. They also don’t want a range that doesn’t actually show them what they’ll get for their vehicle. They want an offer in real-time so that they keep moving forward with shopping for a new vehicle or just having the money in their hands as fast as possible. On top of this, some dealers won’t even make an offer unless the customers are physically in their store. 

    During the customer acquisition process, customers want transparency, reliability, and the best deal they can get. They also want to do things on their terms. Not everyone has the ability to come to a dealership with their vehicle. Some people work during the day, and some people work nights and aren’t available during the day, so it’s important to make this process as seamless and easy as possible to boost your chances of acquiring their vehicle. They don’t want to have to drive to several dealerships to get the best price. They would rather get a solid number through an easy-to-use online platform that gives them the information they’re looking for within seconds. 

    Another negative aspect of this customer acquisition channel is that when they do receive a range, they automatically think their car is worth the top of that range. This contradicts the other side of the deal where the buyer is trying to get the car at the bottom of that range. Ultimately, this creates a poor customer experience, reduces brand loyalty, and can deter potential customers from shopping at your dealership. It’s easy for customers to be offended when dealerships make a low offer or give a range that’s not aligned with what they were looking to get.

    Customers want the transparency of an actual number, a fast process, and a competitive quote. Understanding the importance of these qualities will help streamline the acquisition process for both the consumer and the dealership.

    Identifying Challenges In Your Dealer Acquisition Process
    We've taken a closer look at the acquisition process from the perspective of the customer, now let's take a look at the biggest challenge dealerships are up against during vehicle acquisition. 

    The number one challenge dealerships have faced in the last few years is Supply Chain issues. Historically, you could go to an auction and find thousands of vehicles ready for purchase, giving you a great selection to choose from. But now, with a shortened supply, there are fewer vehicles at your disposal and an increasing demand to purchase what’s available. As supply goes down, prices go up, with dealerships feeling the strain of added cost. This means that dealers are paying more for cars, even if they don’t think the car is worth that price. They feel it's better to have the inventory at a higher cost than to not have inventory at all, but consistently overpaying for vehicles is not a winning long-term strategy.

    Another major challenge for dealerships is the overall dealer trade and wholesale process. Some dealerships have established strong relationships with wholesalers or auction houses, communicating with others that they trust to give them a fair price. But in most cases, there’s a lack of transparency within this process. This could lead to a dealer having to make a decision on whether a vehicle is worth purchasing at a certain cost. 

    And so begins the negotiations. Do they take an extra $1,000 loss and move on or do they sit and wait for a better offer? This back-and-forth can be frustrating for not only the dealer, but also the wholesaler. The wholesaler is continuously throwing out bids, trying to run their business, and make a profit, while the dealer is now shopping them around in the same way a consumer buying or selling a vehicle does. 

    It’s evident that the current processes used during the vehicle acquisition process are less than ideal. With all the changing variants, frustrating negotiations, and variable price points, how does a dealer walk away feeling like the winner?

    Find out in part two of our blog series where we discuss how your dealership can simplify this complex process and make it efficient, productive, and cost-effective! For more information on identifying challenges within your own process, reach out to our team and get your questions answered!

    Jeff Bittancourt

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