Used Vehicle Sales Can Provide Stability During a Choppy Economy

June 2008, Auto Dealer Today - WebXclusive

by Rob Chesney - Also by this author

Although economic experts continue to disagree on whether the United States has entered a recession or not, there is no doubt that the economy is facing uncertain times.

Auto dealers aren’t exempt from tempestuous times, either. The combined pressures of an economic downturn spurred by national mortgage woes and rising gas prices are fueling the need for buyers to reconsider new vehicle purchases and refocus attention on used vehicles.

New car sales fell last year to 16.1 million, the lowest level since 1998. With new car sales predicted to be even lower this year, used car sales are on the upswing. According to a report by Wachovia, 28 percent of dealerships reported that used car sales exceeded expectations in a recent survey of 40 vehicle retailers.

An increasing number of dealers are discovering that online used vehicle sales are a direct and efficient way to increase revenue that has been eroded by a decrease in new vehicle sales and lot traffic. Online sites can help your dealership attract more shoppers.

The volume of vehicles listed on eBay Motors has progressively increased since the marketplace launched in 2000, which suggests that as awareness and understanding of eBay Motors grows, so does the number of people coming to the site to sell their cars, trucks, parts and accessories, and other vehicles. More than 3 million vehicles have been sold on eBay Motors with a passenger vehicle selling every 56 seconds.

Dealerships utilize third-party online sites to complement traditional lot sales, increase geographic reach, take advantage of high traffic volumes and to benefit from preexisting search engine optimization. At the same time, vehicle shoppers increasingly are turning to the Internet as their first resource and final destination in the purchase process. Dealerships are even discovering that Internet traffic oftentimes surpasses foot traffic.

Among late-model used-vehicle buyers who use the Internet during the shopping process, Internet use has surpassed all other shopping methods as the source for locating the vehicle a buyer ultimately purchases, according to the J.D. Power & Association’s 2007 Used Study. In fact, the proportion of used-vehicle buyers who ultimately found the vehicle they purchased on the Internet is 10 percentage points greater than the number of shoppers who found their vehicle through the second-most popular method, visiting dealer lots.

As lot traffic continues to decline, consumers are kicking virtual tires as they look for an efficient way to search many options in a short amount of time, not to mention the gas an online search can save. Certified pre-owned vehicle programs also are instilling confidence in a broader range of consumers who are now giving additional consideration to purchasing a used vehicle rather than buying new.

For automotive retailers, increasing sales of used vehicles through online sites could provide a viable avenue for additional sales in an uncertain economy.
Car buying can be seasonal, as well. As tax refunds begin to reach bank accounts and stimulus checks from the government are finalized, a “new-to-me” used vehicle can top the list of some family plans. As consumers focus on the bottom line, new car sales may suffer.

Recently, J.D. Power and Associates decreased its 2008 forecast for U.S. new light vehicle sales from 15.7 million to 14.95 million, the lowest level since 1994, due to lower consumer confidence and spending, financial market turmoil, and slow sales in early 2008.

With new car sales declining, many dealers will turn to their used car departments and extend them through online avenues to play an increased role to maintain or even boost profitability for the year. Where the economy heads next is anyone’s guess, but as the financial markets endure a wild ride day after day, consumers turn to a safe ride in used vehicles.

Vol 5, Issue 5

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