The used car price climb: What does this mean for dealers?

Nov 24, 2021Industry Trends, News

Car dealer shaking customer hand

If you hadn’t noticed, the price of vehicles is going up and it doesn’t look like things are slowing down anytime soon, with both new and used cars being sold for thousands of dollars more than this time 18 months ago. In fact, since March last year, while the price of your average new car has increased by 10 percent, used car prices have gone up by a staggering 39.8 per cent (1). This figure is just below the record one-year increase for used car prices back in 1975 (2). Furthermore, the average used car price reached more than $26,000 in June this year, a price tag up 27 percent in 12 months.

And, while this isn’t necessarily great news for shoppers looking to buy a new car, dealerships have an opportunity to take advantage of this ongoing demand for used cars.

Why is the price of used cars increasing?

Rewind to March 2020 – how could we forget? – the global pandemic was at its infancy and the economy had abruptly come to a halt and this included the automotive industry. Put simply, the US auto production dropped by an enormous 99 per cent1, in just a month. Over the year, production numbers came in waves, with numbers dropping by a total of 23 percent in 2020 and it’s anticipated to fall by an additional eight percent this year.

Ultimately, the increase in used car prices comes down to two influential factors, and that’s high demand and limited supplies. And, while the ongoing chip shortage has had a direct impact on new car production, that’s not the only thing driving a rise in used car prices. There’s no denying it, consumer demand is there, and better still (especially for your dealership) it’s growing.

But why are shoppers still wanting to get their hands on a new set of wheels? Well, think about it – this time last year, we were all facing a period of uncertainty, leading to consumers not wanting to make big purchases, including the likes of cars. However, with the economy’s clogs finally turning once again, shoppers are both keen and confident that they can get buying again. And with people saving over the pandemic, along with millions of people returning to the office having spent the year working from home, as well as many moving out of the city and into the suburbs, more and more of the population are wanting to get their hands on their own car, rather than use public transport. Plus, the fact that some people are still concerned about catching covid-19 by traveling on public transport only increases consumer demand.

Used cars are costing dealerships more to buy

The price that dealers now have to pay for used cars in the wholesale market has increased by more than five percent from August to September this year, a figure up by 21.1 percent from last year. That’s not necessarily a surprise though, with dealerships needing to stock their showroom in order to make a profit, but the lack of new cars being built is making this increasingly more difficult. Whether dealerships are looking to buy new or used vehicles, it’s costing them. The continuous struggle to get their hands on cars is even leading to dealerships calling up customers and offering to buy back their vehicles.

The demand for used cars is incredibly strong – and actually even stronger than that of new vehicles.

How can your sales team use the price climb to their advantage?

In short, the lack of new vehicles is adding pressure to automotive dealers, to put up their prices – for both new and used cars.

The fact is, consumer demand is still there – people want to buy cars – and dealerships need to make the most of this. Within dealerships across the country, customers are buying cars as quickly as they are going up for sale. Now is the time to put your prices up because people will pay, even for your most expensive vehicles – whether they are new or used. Shoppers are panic-buying and rushing to make a purchase, despite the price tag.

Put simply, the demand from consumers, combined with the lack of supply is allowing dealerships to really pump up their prices. The reality is, you’ll be seeing a dip in new car sales and the only way to make up for this shortfall is by putting the prices of used cars in your showroom.

What does the price climb mean for your service department?

With an increase in used cars sales at your dealership, the likelihood is, this will have a direct impact on parts and service sales.

Think about it this way, if shoppers are buying older cars, then they perhaps won’t be quite as reliable as new vehicles. The benefit of this for dealerships is that they should expect and be prepared to see a rise in the number of customers needing to buy extra parts or have their cars serviced. Of course, using the SnapCell app makes it easier for your dealership to manage its inventory, including the oversight of overage stock. This, in turn, helps to increase revenue in your service department, especially as the demand for extra parts is set to grow.

Looking forward, it’s anticipated that the price of used cars won’t slow down until manufacturers can start producing vehicles and what’s more, building them at pre-pandemic rates.

Promote vehicles and sell stock

With cars in short supply, now is as good a time as ever to promote the stock you have and show customers what your dealership has to offer. Your target audience is ready and waiting, you just need to show them what vehicles you have available.

And with demand from buyers at an all-time high, now is the time to make it as easy and convenient as possible for consumers to shop at your dealership – and better still, from wherever they are in the world. Our solution? SnapCell. Thanks to its walkaround and messenger features, the SnapCell app gives car buyers the chance to view and purchase cars, as well as engage with your sales team – even if the dealership isn’t local to them. For the customer, it allows them to beat the crowds and gain access to any vehicle, despite their location and for the dealership, SnapCell allows them to broaden their customer reach, to a national and even international level.

Furthermore, the SnapCell app allows dealerships to personalize the customer experience, by giving your sales team the ability to search for specific car specifications depending on the shopper’s needs. For example, if a shopper has a budget to still to, then your sales team can use the SnapCell app to easily find cars that they have in stock, within that price range. This not only helps take customer experience up a gear but also increases the chance of making a sale as a result. Ultimately, SnapCell gives dealerships the chance to boost sales, enhance their reputation, and ultimately drive profit.

With demand high, but supply low, it’s vital that your dealership stands out from the competition. Get in touch with the team at SnapCell and find out how we can help your dealership take things up a gear.





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