Paying the Right Price for Vehicles at Auction

The used car market has never been as important for car dealers and getting the pricing right on the forecourt is essential to maximise profitability. Price it too low and it hits the bottom line. Too high and stock stubbornly remains on forecourts and refuses to shift. But forecourt pricing is the end game. Buyers need to get the pricing right in the first place. We know from high street retailing those supporting buyers at auction with the right information makes a material difference to their margins and stock turn. The big used car supermarket businesses get this, but some franchised dealers are behind the curve.

Seldom has there been such a focus on used vehicles. Price inflation has fed into record profitability for dealers across the UK. Will this go on forever? I think everyone knows that the party will end at some stage. It’s a multi-billion pound question for dealers. The perceived wisdom is that the market will revert to equilibrium in about 12 months. So, how much stock should you be carrying now, in six months, 12 months? Is it prudent to keep it tight?

To know this, you need data. This needs to be calculated at model, variant and at branch level to maximise sales and profits which is not easy even with a spreadsheet, and this needs to be recalculated continuously. You need data analytics tools.

The main point I would like to reiterate here is that the name of the game for the next two years is to use tools to constantly monitor and react to changing market conditions. The money will be made or lost with this constant tweaking by model and variant and at the branch level as stock gains become stock losses at some stage over the next two years. So, you need data insights to buy right in the first place at auction and price correctly on the forecourt. And keep on adjusting at model, variant and branch level to optimise profitability and stock turn. Don’t be left at the party when everyone else has gone home.

John Hogan is CEO and Chief Data Scientist at RWA Automotive.

This blog was previously published on MotorTrader.com.