Franchised car dealers do well at selling, but now they are honing their skills at the reverse: Buying people’s cars outright.
Dealers say they are stepping up that actively, adopting a business practice from used-car giants CarMax and Carvana that buy cars from the public, then turn around and sell them.
“Dealers who are good at acquiring used inventory will succeed the most,” Andrew DiFeo, dealer principal at Hyundai of St. Augustine (FL), tells WardsAuto. “One strategy is to buy your used vehicles directly from consumers.”
But they aren’t doing it bluntly, lest they offend their customers. More on that in a moment.
The reason for obtaining used cars directly from consumers, in addition to getting them through trade-ins and auctions, is to help replenish used-car inventories, which have taken a couple of hits in recent years due to ripple effects from the new-car sector.
First, the COVID-19 pandemic struck, forcing automakers to temporarily suspend new-car production, which in turn disrupted the pipeline for future used cars.
Then production was hobbled again, this time by a shortage of new-car parts, particularly microchips. That led to fewer new cars produced then, and fewer used cars now.
It’s been tough acquiring used cars since the pandemic began in the U.S. in early 2020, Peter Chung, president of Toyota of Tri-Cities in Kennewick, WA, tells WardsAuto.
“COVID created a hole in selling new vehicles when production was shut down,” he says. “Because of the trade cycle, we’re seeing a similar hole in the used-car inventory due to those earlier production lapses.”
Fluctuating Prices
It’s likely not something that will get rectified overnight.
“That hole is going to linger,” Chung says. “The average person is keeping their vehicle a little longer. We’ll probably see this cycle go another two to three years.”
In analyzing more than 1.4 million used cars, iSeeCars, an online marketplace, indicates the average 1- to 5-year-old used car now costs $31,624. That’s a 1% increase from a year ago.
“Used car prices had been falling by as much as 7.3% in June 2024, but over the past six months, these prices stabilized,” says iSeeCars Executive Analyst Karl Brauer.
“Now used car prices are going up, and this is before tariffs have impacted new car pricing, which will add further upward pressure to both new and used car prices,” he adds.
Franchised dealers are primarily in the new-car business. Typically, for every 100 new cars they deliver, they sell 75 used vehicles, says Chung.
However, franchised dealers are the first to acknowledge the importance of the used-car department to their overall operations.
Importance of Used-Car Ops
“Oh, it’s very important,” Chung says of used-car selling. “It’s one of the key components.”
At a time of acute new-car affordability issues (Cox Automotive pegs the average price of a new car at $48,641), used cars have become a more viable option.
“There’s no question used cars have become more important,” John Luciano, dealer principal of Street Volkswagen in Amarillo, TX, tells WardsAuto.
“For the first time, we’re seeing cars with 90,000 miles (144,000 km) on them doing well in book value.”
And the worth of a low-mileage pre-owned vehicle? “It will blow it away,” he says.
Luciano will “take a beating” by lowering the price of a new car to facilitate getting a desirable quality trade-in that will do well on the used-car lot.
“It’s almost like doing the deal in reverse. But I can readily get good new cars just by ordering them. You’ve got to jump at the chance to get a good used car that will sell well," he says.
Dealers Use Finesse
Dealers continue to hone their car-buying skills.
“They are getting incredibly good at acquiring used cars,” says Tim Jackson, former president of the Colorado Automobile Dealers Assn. “Their message is: ‘We’re not just here to sell cars. Many of them put screen icons on their websites saying, ‘We buy used cars.’”
Trade-ins and off-lease acquisitions continue to be the primary methods for replenishing pre-owned stock.
But for various reasons (such as downsizing a family fleet), some people prefer to sell a vehicle rather than trade it in for a new one or sign up for a new lease.
Working the service lanes with an eye toward buying vehicles has grown in popularity. Dealerships essentially ask service customers if they are interested in selling their vehicles.
But that requires finesse, not a heavy-handed approach.
“We have a service-lane process with personnel who are trained in suggesting that we buy a customer’s car,” DiFeo says. “But we don’t overdo it. You don’t want to offend a customer who’s just in for an oil change.”
Chung agrees.
“You have to remember, they are here to get their vehicle serviced, not necessarily to sell it,” he says. “You don’t want to do anything that offends them, or they might not be back.”
His service advisers use what he calls a “light” word track.
“They don’t jump in and say, ‘We want to buy your car,’” says Chung. Instead, they ask customers if they want their vehicle appraised. “There is nothing offensive in asking that, he says. “It opens the conversation up.”
