Solera solutions help dealerships out sell, out service, and out perform the competition
Every year, the annual National Automobile Dealers Association (NADA) show attracts thousands of auto dealership employees to network, learn emerging industry trends, and find out about the latest technology that can help them streamline operations and improve their business.
Solera, the global leader in vehicle lifecycle management, will be in attendance at NADA Show 2023 in Dallas at the Kay Bailey Hutchinson Convention Center from Jan. 26-29, demonstrating its industry-leading solutions that help dealerships drive sales, reach more customers, and improve profit margins.
Whether it’s marketing and sales, financing and titling, or service and repair, Solera’s solutions help auto dealers:
Solera’s dealership solutions streamline workflows, provide actionable insights, elevate customer experiences, and keep customers engaged with their dealerships. To find out more about how these solutions can accelerate your dealership’s success, visit Booth 3969 during the NADA show or schedule a demonstration.
The customer experience (CX) is the driving force of any successful business. More than ever, providing customers with seamless service and access to information is vital to attracting and retaining valuable consumers. For that reason, franchise and independent dealership websites must focus on the customer experience by reflecting this cultural shift and offering auto buyers a variety of ways to find the information they seek.
According to recent data from Qualtrix, 8 out of 10 people feel customer experience should be improved across products, prices and fees, customer service, and ease of use. Brands risk losing9.5% of their revenue on average due to poor customer experience. And more than 50%of customers say they are likely to leave a brand after a bad customer experience.
You will lose potential and existing customers if your website is clunky, outdated, or hard to navigate. People have many choices, so optimizing your website experience, for both the car buyer and service client, is key to generating new revenue and word-of-mouth recommendations.
Here’s what to look for:
The first –and most important– element of a successful dealer website is that it’s responsive, meaning it works the same on any device. Most consumers initially research purchases from smartphones, so your branding must be consistent across platforms. Ensure it’s easy to search, provide chat options and use eye-catching elements that are visually exciting. You are selling your products and services here, and this is your first chance to make an impression before a client ever steps through your doors.
Giving your customers many ways to learn about your products and automotive services on their own can only benefit you. A rich and compelling content offering will allow potential and current customers to explore and find answers to their questions on their own before they meet with you in person. Giving them the information they are looking for helps establish you as a valuable resource, even if they don’t buy anything this time. You can offer this by creating an extensive knowledgebase on your dealership website with testimonials, product videos, and articles on trends or new releases. Customers will check your social media for reviews, so stay on top of those channels. And offering a “Get a Quote”/”Build Your Vehicle” page allows the consumer to envision how the vehicle will work with their lifestyle.
Offering a vibrant car search inventory is another way to elevate the customer experience. Consumers like to do their research, so provide different ways to imagine themselves in one of your vehicles. Here are a few suggestions:
Finally, identify the most utilized features customers visit and mine them for data and insights. And don’t fall back on updates. Continue to innovate and improve your site based on what you see customers engaging with and visiting the most. Crafting a rich and engaging dealer website will elevate your customer experience and set you apart from your competition. Find out more about how to create a new or optimize your current independent or franchise website today!
If you run a dealership, your teams can spend ample time transferring data between systems, sometimes entering the same data multiple times. In general, dealership management systems (DMS) are designed as a point of origin, meaning they are primarily constructed to push data out and not take data in. They were designed this way for a good reason. Protecting access to the DMS secures the sensitive financial information stored within.
However, this architecture also means that dealership employees may spend significant amounts of time entering the same data into more than one system. From the time a vehicle is acquired until it is sold and booked, multiple employees log in and out of the customer relationship management (CRM) system, inventory tool, and DMS, often for overlapping purposes. A manual data entry process adds time to the sales process and increases error risks each step of the way. A single mistake, such as transposed VIN digits incorrectly entered into a DMS, can lead to multiple errors in other systems. Simply correcting the error in the DMS often doesn’t resolve the errors in the other systems, and that’s if a dealer even realizes where the initial inaccuracy occurred. This can lead to valuable time spent on the phone with customer support to identify the error source and the required fix in each system.
Dealers can address these inefficiencies with a unified platform from DealerSocket that integrates and connects your dealership’s DMS, inventory tool, and CRM in near real-time. These integrations enable an instant data exchange from system to system, rather than pushing data in large batches from one system to another.
Read on for several key examples of how your teams can streamline processes with these enhanced integration capabilities.
#1: Enter vehicle data almost instantly
When dealers purchase vehicles at auction, information for every vehicle has to be entered into the DMS. Because dealers typically use their inventory tool to acquire vehicles at auction, the information already in the inventory tool needs to be transferred into the DMS. Some DMS systems cannot accept this information from an outside source like an inventory tool, so all the material must be manually entered into the DMS. Other DMS systems can obtain this information from an inventory tool overnight. So, dealers have to wait overnight or manually enter it into their DMS if their time is limited. If a list has 20 vehicles, manually entering this information can take hours. Plus, time is not the only issue. Entering data into two systems increases the risk of manual errors.
Fortunately, DealerSocket Inventory+ is integrated with IDMS and Auto/Mate DMS. When dealers go to auction, they can scan the VIN into their Inventory+ mobile app or select it from the auction’s run list on the app to appraise and purchase a vehicle. After purchase, they can then immediately add that vehicle into their inventory. That vehicle’s basic info is automatically pushed into the DMS, so multiple entries are not required.
#2: Effectively manage trade-in appraisals
Customer trade-ins are typically appraised in the inventory tool. But trade-ins most often initially appear as part of sales lead opportunities in the CRM. This means both systems need a trade-in vehicle’s info, which requires duplicating information into both systems. Using the DealerSocket integrated systems, you can quickly manage trade-ins without entering data multiple times. Here’s how:
#3: Desk deals effectively
A standard sales deal begins with an opportunity in the CRM. The inventory tool and DMS provide vital support so that your dealership can complete these deals successfully. When you start working on a sale by entering the customer’s personal and trade-in vehicle information into the CRM to desk the deal, this same information will need to be available to the DMS and inventory tool as well. This can lead to excess time spent reentering the same information into three different systems to complete one deal.
Unlike other systems, where double or triple entry is inevitable, you can utilize integrations within DealerSocket to push necessary data between systems in near real-time. The trade vehicle can be added to the CRM sales opportunity and moved into Inventory+ for evaluation. Then the figures are pushed back into the CRM, so you can review those figures to desk the deal.
After you complete the desking process, you can then submit the credit application in the CRM and send it out to finance vendors for bank approval. Finally, the whole deal can be pushed from the CRM into the DMS, along with the customer’s personal, credit, and trade-in vehicle information. With this information sent via the integration, which eliminates the need to enter it manually, contracting and booking the deal in the DMS is expedited, and the opportunities for data entry errors are diminished.
With an integrated CRM, DMS, and inventory tool, you can enter information in one system and view it almost immediately in all three.
#4: Account for price changes
Something as simple as changing the price of a vehicle can cause problems without enhanced integration capabilities. Some inventory tool integrations cannot push price changes into their DMS at all, meaning pricing done in the inventory tool will not be reflected in the DMS without manual entry. Dealers who wish to enter pricing in only one place must enter it into their DMS and wait for the DMS to push those changes into their inventory tool, which can take several hours or even an entire day. Other inventory tool integrations can update price changes into the DMS, but not in near real-time, which means pricing in the inventory tool may not be reflected in the DMS until the next day. Dealers who do not wish to wait have to change the price on both devices manually.
Fortunately, you can automatically view price changes in near real-time with integration capabilities from DealerSocket. Whether a dealer inputs the price into Inventory+ or the DealerSocket DMS, the price is immediately available to send out to third parties.
Find lasting success with DealerSocket
Connecting your systems is a win for your teams, customers, and business objectives. With integration capabilities, you can:
Save your dealership ample time, ensure accuracy, and reduce manual errors when integrating your DMS, inventory tool, and CRM with DealerSocket Inventory+. Visit dealersocket.com or give us a call at 888-993-1237 to get started today!
The current shortage of inventory has been a major challenge for the entire automotive industry: sales reps who depend on commission-based pay, auto workers facing a wave of temporary layoffs, suppliers grappling with the temporary shutdowns imposed by the automakers, and, of course, their customers. Everyone is feeling the impact of the new vehicle inventory shortages made even worse by the global semiconductor shortage in early 2021.
However, one group has been able to turn the inventory crunch to their advantage: dealers. With hardly anything new to sell, dealers are raking in more gross profit than ever.
Of course, the only hitch in what is otherwise such a sweet high for dealers is that you have to have inventory to sell if you want to remain on the upside of the supply-and-demand game of tug of war.
With experts predicting that the shortages will continue through mid-2022, there is no better time to stay in the lead and get aggressive with sourcing efforts. Dealers are competing with rental car companies and large, national used-car dealerships for pre-owned inventory. If you’re relying on the same old sourcing techniques, you’ll be running out of cars sooner rather than later.
Here are a few ideas that could help increase inventories despite the current supply-demand mismatch
Contact Unsold Customers
Make call lists of unsold customers going back three months. Some bought elsewhere, but some did not buy at all. Vehicles belonging to those non-buyers may be worth thousands more than they were two months ago. Reach out to them. It’s worth a try.
Buy Lease Returns
Buy any and every possible lease return you can: regardless of brand or customer. Don’t pass on a vehicle just because it has damage. Age means nothing. Advertise and market the heck out of this.
Let customers know they might profit from any pre-set residual value from lease inception. For example, if that purchase option was $10,000 and a dealer can pay the customer $14,000 for the lease return, that’s $4,000 cash in the customer’s pocket.
If you can’t sell the vehicles, wholesale them. The usual rule of thumb with wholesale is that dealers may break even, lose $100, or make $100. Now dealers are making $3,000 profit on vehicles they would have called junk two years ago. Dealers are making $70K or $80K a month in wholesale profit. It’s a whole new profit center.
Establish a Service Drive Appraisal Program
There’s a right way and wrong way to source pre-owned vehicles from service customers. First, don’t put existing salespeople in the service department and expect them to be successful. Hire someone to work exclusively in the service department and pay them a base salary.
Don’t approach customers in the service drive. You don’t want to scare them away, so place signage in your service drive that promotes your free market valuation. When customers raise their hands, only then can the salesperson engage. For customers who don’t raise their hands, leave an appraisal on their front seat.
Pay More, Sell for More
Some dealers don’t want to spend ridiculous amounts of money to buy pre-owned inventory. Yes, vehicles are way overvalued. But there’s no inventory.
Pay more to get cars that you would have passed on two years ago but then sell for more. If you don’t pay more, you’ll be sitting with no inventory – so get in the game.
Cast your marketing net wider. Customers are willing to drive a long way to get the vehicle they want. Dealers are holding their prices firm, and customers are willing to pay. Many stores are averaging $3,000 to $6,000 in front-end profit per vehicle. Don’t bother looking at market data to see what cars are selling for because it means nothing.
Just keep raising prices. Your competitors are, and they’ve been very successful. Many dealers are having the best months they’ve ever had in their history. Cars are routinely priced at 135 percent to 145 percent to market, and customers are paying.
This craziness will probably continue for at least another year, so it’s time to think outside the box when it comes to sourcing pre-owned inventory. Hold free car clinics, leave cards on vehicles in grocery store parking lots, whatever it takes. Gather your team and brainstorm. Inventory won’t drive itself onto your lot.
Discover how you can make increasing Profit Per Day™ easier by visiting https://dealersocket.com/products/inventory-management/
By Darren Militscher
Darren Militscher is a nearly 20-year veteran of the automotive industry who serves as a Senior Strategic Growth Manager for DealerSocket. He started his career working on the inventory management solution that would become Inventory+. Email him at [email protected]
By Merritt Critcher
Inventory+ is a pricing, merchandising, and syndication machine, but at its core Inventory+ is powered by the Ideal Inventory Model™, an algorithm that focuses on profit per day. It’s also the culmination of multiple tools and products that led it to become as powerful as it is today. Since its inception, it’s been a tool to help dealers manage their inventory from acquisition to disposition with a focus on increasing front-end profit for dealerships.
Inventory+ uses data-driven analytics to deliver quick answers about vehicles in your inventory and your market to help you make informed stocking and pricing decisions. And more importantly, its focus on your inventory — from acquisition to disposition — is designed to drive profits for your dealership.
It was the foundation of two inventory software platforms — AAX and eCarList — that formed Inventory+.
Simplifying Vehicle Listings
The founder of eCarList — who happens to be my brother, Len Critcher — had a dealership that sold vehicles entirely online. Though online sales were taking off, there was a dearth of efficient software tools to create vehicle listings. The task at the time was manual and quite tedious.
But Len was determined to simplify the process. Aided by a software developer, he crafted a listing tool that housed information vital to online vehicle sales, such as photos, descriptions, and prices. The tool would then load that information onto third-party vehicle-shopping sites.
Len’s online car sales took off, and he quickly recognized that his tool could be adapted for use by other dealerships. The software developer moved into some extra office space at the shipping company I part-owned in suburban Dallas, and eCarList, an automotive inventory and marketing software company, was born.
While eCarlist was getting going, I owned a shipping brokerage that handled the shipment needs for over 200 dealers. We realized we could include anoter essential tool for dealers within eCarList – transportation management. So, we added a feature that allowed dealers to notify their shipping company when a vehicle was sold and ready for transport.
The majority of the dealerships I did shipping for were among the first to sign up for eCarList. It got their cars posted online faster, and they were pretty excited that they could just click a button within the software, and we’d send an 18-wheeler to pick up their car.
As the software technology grew, I got out of the shipping business and joined my brother’s company in 2010. Shortly after, we debuted one of eCarList’s most popular enhancements, its TrueTarget™ mobile app that allowed users to appraise, price, and manage inventory on the go.
AAX + eCarList
Both eCarList and AAX came onto the scene in the early 2000s, when online retailing was in its infancy. Many of the features that appealed to dealers then appeal to them now, though those features have been enhanced and refined.
One of AAX’s major strengths was that it integrated with a store’s dealership management system to analyze past sales transactions to determine which vehicle makes, models, and trim levels sell fastest and for the most profit.
Those vehicles made up a dealership’s Ideal Inventory Model and still do.
Dealertrack Technologies integrated the products after acquiring AAX in 2009 and eCarList in 2011.
Using technology to enhance dealership profits isn’t a new notion for DealerSocket. So, in 2015, Inventory+ became part of DealerSocket’s suite of products.
Taking Inventory Management to the Next Level
Since then, and particularly in 2019 and 2020, we’ve released many new features and placed the software on a new platform. Inventory+ has a new look and feel. It’s nimble, intuitive, and easy to use, whether you’re working with inventory at a single rooftop or across hundreds of dealerships.
Users can set up and save workflows for daily tasks and thus reduce the time to complete those tasks from hours to minutes, something that couldn’t be done in previous versions of the tool.
One dealer group describes the user experience as “frictionless.”
Our enhanced pricing tool allows dealers to work faster and smarter. They’re able to apply pricing rules to their inventory in bulk based on actual incentives from automakers while keeping an eye on other factors such as market conditions, and how competitors advertised prices in relation to MSRP.
In fact, one dealer repriced his vehicles by exterior color as part of his Memorial Day promotion, discounting the prices of red, white, and blue vehicles in a matter of minutes.
Using the tool, he searched for and pulled up his red vehicles, hit “select all” and updated their prices simultaneously. He did the same thing with his white vehicles and his blue vehicles, all within five minutes.
Here are just some of the many Inventory+ enhancements made over the past year:
Since the early 2000s, we’ve been creating software to drive profitability at dealerships. In the past two years, we’ve accelerated that innovation. Now, more than ever, dealers need to take a look at their vendors and ask: Are they helping me, or competing against me?
Merritt Critcher serves as director of product management for DealerSocket’s Inventory+ line, a role in which the 16-year industry veteran works closely with dealerships to develop software solutions that enhance their profitability and cash flow.
By Gregory Arroyo
I recall a conversation I had with an industry attorney during the early days of digital retailing. Technology vendors believed the Digital Age had arrived, while dealers were saying, “Not so fast.” My question to my attorney friend was, “What’s the holdup?”
He said the problem is dealers aren’t treating digital retailing as an experience — that customers should be rewarded for taking that path to purchase. He suggested that dealerships with separate facilities for fleet sales should consider directing digital buyers there vs. the showroom.
He then relayed his recent experience purchasing his second vehicle from the same dealership. He called the store, explained that he was a willing buyer who simply wanted to update to a newer model, and negotiated the deal over the phone. Expecting the red-carpet treatment for essentially being a rollover, he felt disappointed when he discovered he’d have to wait like the other customers in front of him.
That conversation came to mind when I came across Urban Science’s “Around the Bend: How COVID-19 Impacts the Next Normal for Dealers,” a report based on an online poll of 1,506 adult consumers. It serves as an update to the firm’s August 2019 report, which served as a reality check for digital retailing.
The 2019 study, which included responses from 2,001 consumers, concluded that car buyers weren’t ready to ditch the dealership experience because they still want to kick the tires and take a test-drive. Respondents also said they still needed someone at the dealership to guide them through the process.
I wrote about why I think that represents an opportunity for digital retailing in an April 2020 blog entry, “Digital Retailing’s True Test.” However, I’d like to share an even greater opportunity revealed in this year’s updated study.
See, while the report did show that a majority of consumers still believe buying a car is too big of an investment not to see (81%) or test-drive (79%), it did show that 67% would be more open to buying online if it was a brand or dealership with which they were already familiar.
Again, my convo with my attorney friend came to mind, but so did a discussion I had with a DealerSocket Strategic Growth Manager. He said the main reason some dealers fail to realize the full potential of data mining is because they don’t have a dedicated process. Well, based on that stat from Urban Science, maybe digital retailing represents a missing link.
Take those data-mining campaigns targeting customers approaching the end of their lease or who qualify for smart payment offers. The emails could contain links to a landing page that explains your offer and a link to a streamlined buying process powered by your digital retail tool.
Back in April, another DealerSocket Strategic Growth Manager told me about a Pennsylvania-based dealer group that was rewarded for having a service-drive sales process when the pandemic forced local officials to limit dealers there to appointment-only sales that concluded with service-drive deliveries.
Before the pandemic, the process delivered 100 units a month behind two dedicated salespeople, a sales manager, and an F&I manager, who actually has a dedicated desk (with enough privacy) in the service area. The reason for that is the group wanted that buying experience to feel different and free of pressure.
The group equips the sales team with its inventory management tool’s mobile app (Inventory+) to feed appraisers with scanned VINs and photos of every car that comes into service. The appraisers then prepare a package that includes a vehicle history report, documentation on the vehicle’s going price in the local market, its fair Kelley Blue Book value, a check voucher for an amount over that value, and the salesperson’s business card.
Signage in the service drive lets customers know they can get a free vehicle evaluation by texting a specific number or talking to their service advisor. All customers get an appraisal, but the hand-raisers represent high-value targets the sales team engages.
However, even customers who don’t bite get the appraisal package. They also get enrolled into a CRM-powered campaign that includes email and a phone call — the latter scheduled for the day after the customer’s service visit to ensure satisfaction and to revisit the offer sheet.
I can see three potential opportunities in that process for digital retailing to have an impact. Maybe it’s a kiosk in the service area loaded with a digital retail tool like DealerSocket’s PrecisePrice; perhaps it’s tablets. Whatever the case, digital retail should be a part of those follow-up efforts, whether it’s a link in an email or guiding customers through the process over the phone and emailing a link to their PrecisePrice deal.
And just maybe that buyer’s journey you create in the service drive serves as the entrance for sales opportunities your data-mining efforts generate.
While 93% of respondents to the Urban Science study expressed some concern with an entirely online purchase process, more than two-thirds said they were comfortable shopping online, signing paperwork digitally, and negotiating price and terms via email, chat, or phone.
Recently, the individual leading the digital drive for one of the largest privately-owned dealer groups in the United States addressed DealerSocket employees over a Zoom call. He talked about COVID-19’s impact, inventory shortages, the group’s efforts to build that clicks-to-bricks experience, and how consumers still need to be educated on what digital retailing is. What caught my attention was his response to whether he believed consumers still want the showroom experience.
“Absolutely … Only a small group of individuals want the Carvana model, and we’re going to be there,” he said. “But most customers want to step foot in a brick-and-mortar shop. If they want to get their payment, we’ll do that and meet them in the showroom.
“So, we believe a critical point in that process is that showroom experience,” he added. “You shouldn’t lose a customer who completed things online because you told them it would take 45 minutes, but it takes us three hours.”
It happens at every dealership. You’ve invested time and money reconditioning a vehicle that seemed perfect for your lot. Thirty days becomes 45, 45 days becomes 60, and, finally, it becomes clear this car has to go.
Do you sell the vehicle at auction and incur transportation costs, auction fees, and possibly wholesale losses? What if your frontline-ready car is purchased by a competitor and sold at a profit?
If your store is part of a dealership group, the best and most profitable solution is to give that aged or unwanted unit another run at a sister store’s lot. By trading within your dealership group — a process known as group trade — you’re able to reduce wholesale loss, save on auction fees, keep core inventory within your group, and drive additional overall group revenue. In this article, we’ll outline best practices for running group trade for operations of all sizes.
There are multiple ways to set up group trade. We recommend a model that organizes all your group’s used-car managers and general managers weekly. Having this regular cadence keeps your trade desks at one to two hours. We suggest scheduling them on Mondays at 9 a.m. or 10 a.m., so trading ends before the dealerships get busy.
We recommend you assign a nonbiased individual, such as the group’s used-car director, to manage and moderate the bidding. This person will also need the authority to make decisions, especially when it comes to settling disputes. Think of this individual as your group trade project manager, because you need someone to keep all your managers and GMs on track.
Each week, managers must compile a list of vehicles they plan to make available during the trade desk. Every group has its standards, but we recommend sending any unit that’s been on the lot for 45 days or longer.
Vehicles listed should be reconditioned and priced correctly before the trade desk. Cosmetic and mechanical problems are often the reason frontline-ready vehicles go to auction. Requiring that vehicles listed for trade are in good condition also helps instill trust. We’ve seen it happen before: A vehicle traded to a sister store requires reconditioning that wasn’t disclosed. The point here is you need to set ground rules to which all participants are held accountable.
As for pricing, vehicles should be priced to current market conditions. That means vehicles that haven’t received a recent price update shouldn’t be offered for trade.
Also make sure vehicles listed for trade have clear, detailed interior and exterior photos, as well as full book-out information. Remember, transparency is key. Like customers, your fellow manager at a sister store won’t purchase a car without photos, as vehicle images often help identify problems or explain why a vehicle didn’t sell.
Knowing that aged vehicles will be offered to sister stores encourages used-car managers to be more vigilant during trade walks, and when monitoring and adjusting retail prices to market fluctuations, and making sure vehicles have been booked out accurately.
Make sure your moderator diligently manages the trade desk timeline. By Saturday night, all vehicle lists should be submitted to the moderator. By Sunday, have your moderator compile all vehicles available in trade desk. Managers can look at the list Sunday and prepare to bid by Monday’s call.
Used-car folks love to bargain. That’s why they’re in the business. Help managers understand they will get great vehicles if they give great vehicles — i.e., “You give me a break on this car, and I’ll give you a break on that car.” That’s a win-win for the group. Encourage managers to collaborate and cut deals, but make sure every deal goes through the group trade desk.
The following are other trade desk strategies you can implement:
Above the obvious benefits, group trade promotes camaraderie among colleagues who work for the same company but may not know one another. Our team has seen group trade foster brainstorming, collaboration, and increased morale, and decreased turnover.
By Gregory Arroyo
Field reports from DealerSocket’s team of Strategic Growth Managers reveal that dealers haven’t pushed the panic button just yet. Their focus is on the high degree of pent-up demand they believe rests on the other side of the industry’s recovery from the COVID-19 pandemic, and the chance to pick up market share when markets begin to open up.
A Strategic Growth Manager operating in the Sacramento, Calif., area noted that dealers benefited from the way things came to a halt quickly vs. a slow drip. That allowed them to make inventory and staffing decisions through March, as well as seek expense relief from their floorplan finance sources and technology vendors.
For dealers with closed showrooms or stores operating with limited staff due to strict social distancing guidelines, there was little time to delve into emerging sales trends they had not experimented with before the pandemic. In a lot of cases, management teams handled appointments and sales in the absence of sales staff.
DealerSocket’s Strategic Growth Managers report many learnings and process refinements at dealerships, especially for operations that had tested remote sales and digital retailing.
In terms of pre-owned inventory, Strategic Growth Managers operating in the Northeast report that some dealer groups were able to squeeze in trade desks just before stay-at-home orders took effect. Multi-state dealers on the East Coast were also able to reshuffle inventory out of areas with strict sales guidelines.
Beyond that, there’s wasn’t much to do with respect to managing inventory, aside from updating vehicle listing and other merchandising activities.
Virtual auctions reported strong attendance in March. The problem was, dealers weren’t buying, with KAR Auction Services reporting an 84% decline in volume for virtual sales nationwide. And with the physical auctions closed and big dealer groups not buying, the firm reported a 12% decline in wholesale values — 15% if adjusted for fewer lower-priced trade-ins.
“We have heard repeatedly from dealers … about their hesitancy to put a value on a trade-in that is not part of their core inventory,” Black Book stated in a recent report, adding that dealers are hesitant to get stuck with vehicles they don’t traditionally stock in a depreciating market.
Data from DealerSocket’s Inventory+ team shows a 20% week-over-week decline in total appraisals the week of March 16, when most stay-at-home orders took effect. Trade appraisals, or appraisals that occur on a customer’s trade-in, were down 26% during the same period, while “Purchase Appraisals” on wholesale and auction units plunged by 35%, according to the data.
Overall, appraisals were down 34.4% from the first week of March to the first week of April. However, activity has trended up since.
As of the week of April 19, according to J.D. Power, nearly all markets are in recovery or exhibiting growth, as dealers adapt and selling regulations are clarified.
DealerSocket data also reveals a pick-up in activity, with appraisals spiking the Monday following April 17. That’s when the U.S. Department of Homeland Security deemed auto sales an essential service. Much of that lift, however, was from dealers appraising wholesale and auction vehicles, which increased 182% from the week prior.
DealerSocket’s data also revealed an uptick in consumer activity, with appraisals on consumer trade-ins increasing 34.3% during the first three weeks of April. Even more compelling is appraisals initiated by consumers through online lead forms remained steady throughout the period after inching down 2% on a week-over-week basis the week of March 16.
A snapshot of website traffic by DealerSocket’s DealerFire team also reveals a normalization of online consumer behavior, with organic traffic climbing 15% to 20% over the 10-day period ending on April 24. Dealerships located in states that allowed showrooms to remain open saw a sharper overall rebound. In contrast, dealers in states with a high number of COVID-19 cases continued to experience significant declines in site traffic.
However, those dealers are now starting to see increases, with consumers returning to more normal browsing behavior. “In both cases, traffic has rebounded in the past week,” read DealerFire’s April 24 Digital Marketing blog. “But in Texas, the traffic has already come back to very near pre-COVID numbers.”
Leads have also been trending upward, with DealerFire data revealing that dealers in areas less affected by COVID-19 are now seeing numbers equal or within striking distance of pre-COVID-19 trends. Even dealers in heavily impacted areas are seeing an uptick in lead submissions.
On the retail side, dealers continue to hold the line in terms of their asking price for the Top 50 makes and models, which inched down 3% from the week of Feb. 16-29 to the week of April 14-20, according to DealerSocket data. However, there is evidence dealers are willing to meet customer demands, with the data revealing some front-end gross erosion. Still, dealers have lowered their selling price just 1% during the period. Days’ supply, however, was up 718%.
The immediate concern is aging, especially if the expected feeding frenzy never materializes. If it does, throw aging out the window, said on Strategic Growth Manager in the Northeast, as dealers will be able to demand higher gross profits. There are exceptions, however.
Current model-year and one-year-old pre-owned vehicles could be problematic, as automakers continue throwing big rebates, deferred payment programs, and other incentives on the hoods of new models. So far, according to J.D. Power, incentives remained at a record level of $4,700 per unit during the week of April 19, which could be enough to pull pre-owned buyers to new-vehicle lots.
Lease extensions permitted in March could also hamper the values of late-model units, with many of those off-lease vehicles expected to hit the market by the end of April.
As for profit drivers, the belief is the potential lies in three-, four-, and five-year-old vehicles, especially with the deadline for filing federal income taxes extended to July 15 and the IRS drowning in unopened tax refund requests.
That’s why dealers are holding onto inventory, as they know availability will be critical. The big question is just how quickly things will come back, especially given that the used-car guides typically take 14 to 30 days to adjust.
The good news is many of the challenges dealers experienced during the Great Recession have yet to materialize. For instance, the national average for a gallon of gas, according to the latest data from AAA, has dropped 48 cents in the last month to $1.883 — the cheapest in more than four years. During the height of the Great Recession, the national average peaked at $4.10 a gallon.
That might explain why trucks and SUVs dominate DealerSocket’s Top 10 pre-owned sales lists for all regions except the South (See Charts). In fact, J.D. Power called the pickup segment the most resilient in the industry in a recent report. Recovery in the SUV segments is also gaining steam.
Also absent is the credit tightening seen during the last recession, with J.D. Power noting that finance sources have greeted record transaction prices — the average reaching a new high of $35,800 during the week of April 15 — by approving higher loan-to-value ratios across the full spectrum.
“Consumers in all credit categories are purchasing and financing more expensive vehicles,” the firm stated in its report, adding that a higher percentage of buyers are also financing “more than the value of their vehicles relative to historical levels.”
There are looming signs on the horizon, however. As reported by Automotive News, Ally Financial Inc. told investors during a recent call that 15% of its auto-loan customers have asked for payment deferrals. And of the 1.1 million borrowers who requested forbearance, 70% had never had a late payment.
Automotive News also reported on April 21 that Credit Acceptance Corp., which specializes in financing credit-challenged buyers, warned of a sharp drop in payments. The firm was among the first to report an uptick in delinquencies, the publication noted.
In terms of most-likely and worst-case scenarios, Black Book projects a 25% drop in new-vehicle sales if unemployment jumps to 10%, as well as a 17% drop in wholesale values compared to pre-COVID projections, with some recovery in the fall. The firm’s worst-case scenario has new-vehicle sales and wholesale values falling by 40% and 25%, respectively.
Consumer confidence and unemployment filings will be critical indicators in the weeks and months ahead, with KAR Chief Economist Tom Kontos noting that values should improve once new filings dip from the millions to pre-pandemic averages of about 250,000 claims per week. While he doesn’t expect wholesale values to fall 20% below seasonal averages, he warns it could be close.
J.D. Power put 2020 retail sales at between 11.3 and 12.5 million and total sales at between 12.7 and 14.5 million vs. its baseline of 16.8 million. The firm also projects that the virus could eliminate between one million and 1.7 million sales between March and July.
As for dealers, the big unknown is pricing, which means transactional data will be a critical guide as they navigate the recovery. Their physical inventory should be their No. 1 priority, as well as their virtual showrooms. Vehicles need to be cleaned, and merchandising activities need to be kicked into high gear. That means updating photos and vehicle descriptions, as well as refining their digital marketing and data mining strategies to get eyes on their inventory.
We continue to think about all of you, our customers and partners, during this difficult time. This pandemic has caused deep challenges across our industry and for all of us, and I hope you know that DealerSocket continues to be here for our dealers. Our goal has been to strike the right balance between being prepared for our dealers and the market when our industry recovers and offering discounts to help our dealers as much as possible during this difficult time.
We will get through this, and we will get through this together. We are committed to fighting through this with you. We are beginning to see the first signs of positive trends as we climb out of the depths of the COVID-19 pandemic, and this has us all hopeful for the future.
In April, we heavily discounted our software for our dealers. In addition to our discounts in April, we have decided to offer the following DealerSocket billing reductions for May for all of our dealers:
We have already sent out our May invoices, so next week you will receive a credit memo for the above discounts. With that said, similar to our discount package last month, there are some basic qualifying terms listed below.
In addition to these discounts in April and May, DealerSocket continues to offer our customers several promotions and free months of certain software products to help you navigate this crisis. Our offers include promotions for:
Since we are adding promotions and various resources for dealers often, please view DealerSocket’s latest information by clicking here, and, as always, please feel free to reach out to your Customer Success Manager with any questions or if we can help in any way:
If you are not yet an Auto/Mate DMS customer, I hope you know that we can reduce your DMS bill significantly during these challenging times as well as into the future by switching to Auto/Mate DMS. We have several bundled packages that include our Auto/Mate DMS product combined with other DealerSocket products to support you.
Thank you for partnering with DealerSocket. I hope you know how much we value and appreciate your loyalty, partnership, and your business.
I wish you, your families, and your team members health in these unprecedented times.
CEO and President
Details regarding our COVID-19 relief package:
By Gregory Arroyo
Greg Tatum has a warning for dealerships everywhere: Cyber threat actors are working overtime. Noting a definite uptick in suspicious activity since COVID-19 hit Europe in late February, he adds:
“Threat actors are actively searching for new targets through a number of different mediums. Things like social media platforms are a very popular target for information gathering that can be used in an attack.”
Tatum serves as DealerSocket’s head of information security. He joined DealerSocket nearly four years ago from a security services firm that works with companies in much more sensitive environments than automotive. I’m talking about healthcare and government contractors, sectors that see billions of attacks each year. So, yeah, we have the right guy on the job.
“DealerSocket spends a considerable amount of effort protecting our customers’ data,” he notes. “It’s part of what we do just to make sure our customers’ customers’ data is protected.”
Tatum isn’t the only one sounding the alarm. The FBI issued its own warning on March 20, noting that scammers are leveraging the COVID-19 pandemic to steal money, personal information, or both.
Just last week, the National Automobile Dealers Association reported that attackers are now putting up COVID-19-related websites that prompt visitors to download an application to receive COVID-19 updates. But you don’t need to download the app, as the site installs a malicious binary file as you contemplate whether you should.
The attack method uses AZORult, software that originated in Russia approximately four years ago to steal data and infect the breached computer with malware.
Tatum also alerted me to a new phishing campaign that pretends to be from a local hospital notifying recipients that they have been exposed to the Coronavirus and they need to be tested.
But it’s not just phishing and ransomware attacks. Business email compromise, or BEC, is also on the rise. That’s when a cyberthief breaks into a legitimate corporate email account and impersonates an employee to get the business, its partners, or other employees to send money or sensitive data to the attacker.
“In this climate we live in today, this is part of business,” Tatum says. “This is part of what we have to deal with as consumers of technology.”
Tatum, by the way, is available to help. He advises DealerSocket customers to contact their Customer Success Managers to get connected. In the meantime, he offers the following four tips to safeguard your organization and your customers’ data:
The following is general security etiquette your teams should employ:
Use company-issued computers and mobile devices for work purposes only. If you don’t have a company-issued device, be sure to check your company’s policies about using personal devices to access your organization’s data or networks.
Additionally, consider creating separate user accounts. Never use your work email for personal reasons or vice-versa. This segregation helps the company maintain the confidentiality of the data it collects and helps you maintain your privacy.
Update your router’s username and password immediately and use a strong, unique password. And never use the same password for your network and your router. Note that most routers ship with default login credentials that are public knowledge.
The comfort of your own home is no reason to forget about physical security. Simple acts like keeping doors locked and not leaving mobile devices unattended in a vehicle are non-technical ways to improve security.
Gregory Arroyo is the former editor of “F&I and Showroom” and “Auto Dealer Today” magazines. He now serves as senior manager of strategic content for DealerSocket. Email him at [email protected].
By Frank Scott
Trade-in appraisals are a boon to both new- and used-vehicle sales and a great way to acquire core used-car inventory without paying auction and transportation fees. And all it takes is saying the following to every customer who drives onto your lot:
“Hey, I see you drove up in that Dodge Charger (or whatever). We’re looking for used cars. Do you mind if we do an appraisal?”
Some salespeople might shy away from making that statement because they feel it adds yet another layer to negotiations, but they shouldn’t. Here are four steps to help you craft a comprehensive appraisal strategy and trade-in mindset that will yield positive results at your dealership.
Make it part of your dealership’s culture to ask every sales and service customer whether you can appraise their vehicle. And make sure to record those interactions in your CRM. Additionally, make sure your customers accompany your appraisers as they inspect their vehicles. Here’s why:
The first question your appraisers need to answer is whether the vehicle they’re evaluating is a retail or wholesale piece. If it’s wholesale, get the car’s book value — Manheim Market Report, Black Book, or Kelly Blue Book — and add or subtract from that value based on the vehicle’s history, condition, and other things that affect its price.
If it’s a retail piece, the following to-do list can help calculate its appraisal value:
You’ve settled on an amount. Now you have to convince your customer it’s a reasonable price. Here’s what you need to show your customer:
There’s no guarantee your customers will agree with your appraisal, but they may be more understanding if you say something like: “We love your car, but we are in the business to make a little bit of money, and this is the best we can do on your car.” That statement may even get them to say, “Yeah, I do need tires; I see where you’re coming from.” The key is to justify your appraisal.
So you’ve improved your appraisal numbers, but are you winning enough appraisals? And what should your appraisal closing ratio be? Here are a couple of stats most dealerships monitor to get those answers:
With car sales expected to plunge during the COVID-19 pandemic, dealers undoubtedly can use all the help they can get. One major advantage of using Inventory+ to assist with appraisals is that its vehicle price data are based on real transaction data, not internet listings.
Remember, it’s dangerous to base your prices on just what the market listings are saying. That’s because some dealers could panic, drop their online price, and then send that car to auction. And you won’t know whether the price you see online represents a car sold at retail or one sent to auction. Following internet prices can be misleading and cause other dealers to panic as well, so don’t be part of the problem.
Frank Scott has been in the automotive industry for over 17 years and currently serves as a Senior Customer Success Manager at DealerSocket.