Data, insights, and effective marketing are all essential in today’s marketplace.

In the world of automotive retail, unpredictability has become the new normal. During the COVID-19 era, we saw government lockdowns instigated which slowed or in some cases idled new vehicle production, which in turn impacted supply chains and shrank dealers’ inventory. On the used vehicle side, this lack of new inventory sent prices for used vehicles skyrocketing, to the point that some four-year old vehicles were trading hands for more money than they did when new.

Stabilizing market

Fast-forward a few years and there are signs that the market is stabilizing. New vehicle inventory has improved and used car prices have been trending downward, yet there are other factors to consider. Prices today on both the new and used side are significantly higher than they were for five years ago and this sticker shock, combined with higher living costs driven by rising inflation and interest rates, has made the situation challenging.

Also, a shortage of new vehicles during the pandemic era, has translated into fewer lease returns today, meaning dealers are focusing more than ever, on acquiring the used inventory they can and turning it as soon as possible.

“There is still significant uncertainty in the market, particularly as it relates to used vehicles,” explains Paul Stock, Chief Financial Officer and Vice President of Operations at Auto IQ, which operates a number of new car dealerships across Ontario. “Moving interest rates and fewer lease returns are driving less inventory on the used side, because you can’t produce a used vehicle without selling a new one.”

Impact on used vehicles

Stock notes that on the new vehicle side, with new inventory building again and OEMs beginning to offer more incentives, the impacts on used vehicles are significant. “If a manufacturer is now offering a $10,000 incentive on a new vehicle, the value of that used equivalent you have on your lot will also drop by a significant amount, sometimes as much as the new incentive, which means that when a used car comes in, you need to have it ready for retail with proper photos and merchandising as soon as possible.”

Additionally, another trend that’s happened in recent years is that consumers are more inclined to cross-shop between new and used cars to find the vehicle they want. At AutoTrader, which recently released findings from its 2024 Car Shopping Journey Study, results showed that 47% of used vehicle buyers now cross-shop with new and 36% of new car buyers are now exploring the benefits of used vehicles. According to Baris Akyruek, Vice President, of Insights and Intelligence at AutoTrader, a major influencing factor in these cross-shopping trends is vehicle availability. “When new vehicles were in short supply a few years ago, this was a big issue for many consumers,” he says. “They couldn’t find the vehicles they were looking for.” Additionally, he notes that this lack of new inventory drove many of these would be buyers, which traditionally were new vehicle shoppers, to look at the used side to find their next suitable car or truck. Additionally, when the price of used cars skyrocketed and demand depleted inventories, on both the wholesale and retail side, those consumers that traditionally purchased used cars, began to look at new vehicles as an alternative.

Maximizing sales opportunities

Akyruek notes that this increased cross-shopping, means that dealers need to really focus on advertising and marketing both their new and used inventories, to maximize sales opportunities.

At AutoIQ, Paul Stock explains that the key to success, particularly on the used side, boils down to acquiring the right vehicles at the right price. “Dealers make their money when they buy the vehicle, whether it comes to them as a trade-in, or via an online or wholesale auction,” he explains. Today, new technologies such as AI and machine learning are taking the guesswork out of acquiring those vehicles, since dealers can use tools such as CARFAX to track the vehicle’s history and vAuto to determine days’ supply in a particular market. If dealers are also highly focused on their marketing efforts and data, they can also look at what colours and options for a particular model are consistently popular with buyers in their marketplace, as well as what words or descriptions they in their marketing and merchandising that enabled those cars to sell more quickly.

Online marketplaces still prominent

At AutoTrader, Baris Akyurek notes that particularly on the used side, online marketplaces are still the top resources for vehicle shoppers and the recent 2024 Car Shopping Journey Study findings showed that 77% of used vehicle shoppers use online portals to find the car they’re looking for. “They also spend a lot of time on these sites researching,” says Akyurek. “They visit these marketplaces as much as 11 times, so there is a lot of due diligence and research happening.” Akyurek says, that it is critically important dealers are taking the right pictures, using the right wording and descriptions, and marketing both used and new vehicles as effectively as possible online.

Ultimately, success and profitability in the automotive retail marketplace comes down to supply and demand, and if dealers are able to adapt quickly to those trends and market their vehicles to those customers seeking them as fast and efficiently as possible, the result is a win-win scenario for both dealers and their clients.

Bringing the data together

One of the biggest challenges dealers face today, is the amount of data that’s coming at them and how to filter through it. “While there are a lot of tools out there, that offer everything from vehicle history to sales rates, turn rates and databases that show your dealership’s history of selling these types of vehicles, it’s often very disparate,” says Paul Stock. He sees a time where, bringing all that information together, so that used vehicle managers can understand what all the data points are and where to readily access them and how to use them is coming. And when it does, it will provide dealers with incredible insights, leveraged via AI technology to determine where they want to market a specific vehicle and make highly accurate inventory decisions and pricing to ensure they get the best sale possible. “Understanding customer behaviour is essential,” Stock explains. “Being able to align our inventory with those future customer preferences and leveraging the data we have to do so, is going to be hugely beneficial.”