As we begin a new year, dealers are evaluating their business needs for the next 12 months. Likely at the forefront of their priorities is navigating shortages of both new and used vehicles, and restocking dealership lots.
But while the long-term impact of stalled production remains to be seen, we are beginning to see used vehicle inventory rebound, particularly with auction houses reopening.
And fortunately for used-car dealers, consumers appear to be returning to the used vehicle market. According to Experian’s Q3 2020 Market Trends Review, the market for used vehicles rose from Q2 to Q3 over the prior year, yet overall used registrations still were down 8.8% compared to last year.
One of the primary reasons for the shift to the used vehicle market is affordability. According to Experian’s Q3 2020 State of the Automotive Finance Market Report, the average used loan is $21,438 compared to the average new loan of $34,635.
With interest in used vehicles growing, and the market rebounding more quickly than for new cars, it is crucial for dealers to ensure the vehicles they add to their inventory are worth the investment and will be safe and reliable.
Auctions remain a critical inventory source for dealers. And depending on the dealership’s location, the opportunity could be substantial.
For example, according to Experian Automotive Market Insights, since September 2020, the regions with the most vehicles at auction were the Central (194,300), Eastern (223,100) and Southeast (243,900) within the U.S. More vehicles at auction means more opportunity to increase inventory, but there is also an increased need for caution to avoid a bad investment.
With this amount of auction volume, it’s important for dealers to check the history of the vehicles they are considering purchasing to ensure the vehicle is worth the investment. It is crucial to know the risk a used vehicle carries, as it can have a significant impact on both value and safety.
According to Experian research, four out of 10 cars and light-duty trucks on the road have been in an accident, which translates into more than 110 million vehicles. Additionally, over 20% of those vehicles have been in multiple accidents.
And according to the Mitchell Industry Trends Auto Physical Damage Report, the average diminished value for a vehicle involved in an accident in Q2 2019 was $3,151. Vehicle history reports provide added insight that help dealers understand the vehicle they’re buying at auction, and any potential hidden problems it may come with.
While the industry rebounds from the effects of COVID-19, it is important to keep in mind that each consumer has unique circumstances and may still be facing challenges from last year. During a time when it might be more difficult for consumers to view vehicles in person, dealers can help take the guesswork out of buying a used vehicle by presenting a detailed background of the vehicle.
In doing so, dealers provide car buyers with the information and confidence they need to make informed purchases and establish a trustworthy, transparent relationship between themselves and the consumer.
2021 will bring new challenges to the automotive industry. Both dealers and consumers are considering ways to make the most of their budget when purchasing a vehicle.
While a basic tool, vehicle history reports are invaluable for rebuilding inventory and providing important information that establishes trust with prospective car buyers.
Kirsten Von Busch (above) is a senior product manager for the Experian Automotive team responsible for several products and services in the commercial automotive space, including the AutoCheck vehicle history report.