September 2011, Auto Dealer Today - WebXclusive
Let’s take a look at some of the inventory sources buy here pay here dealers can use to find more vehicles that fit their business model.
The public is the original source of all used vehicles. They are the best source of inventory, although buying strictly from private parties will usually not produce enough vehicles to keep your lot stocked. It is, however, advisable to have your employees regularly review the automotive classified ads in the newspaper to look for vehicles that meet your inventory profile. Also, your dealership should maintain an ad in the classified section of your local newspaper advertising that you purchase vehicles.
An aggressive campaign to find and purchase vehicles from private parties can produce a steady stream of good-quality vehicles for your dealership. Some of the dealers we consult with have created a flyer that says, “We may be interested in purchasing your vehicle,” and they regularly check major parking areas in their towns to put flyers on every vehicle they might be interested in. Another dealer has chosen to spiff employees who find vehicles that the dealership ultimately purchases. A vehicle purchased from the public is being used every day by the seller; therefore, you will know the history of the vehicle and repair invoices can often be obtained.
Other car dealerships are the next-best source for vehicles because they can provide a regular supply of inventory at reasonable prices. Most of the vehicles from franchise and independent dealerships will be local trade-ins. Since most dealers clean out their excess, older inventory every week or two, it is likely these vehicles haven’t sat long without being driven regularly. In the past, most new car dealers did not want to sell the types of vehicles BHPH or LHPH operations sell. Today, more new car dealers are keeping these vehicles and retailing some of them to improve their used vehicle sales.
However, there are still dealers who have not chosen to go down this road, and they are an excellent source of inventory. Since there is no competition for the same customer, there is no reason for them not to sell to your dealership. The more dealerships you visit in your area and the more determined you are, the more success you will have in creating relationships that will yield vehicles on a regular basis. Do not be deterred when you get a “No” the first time you approach another dealer about buying inventory. Many times, it takes multiple visits before a dealer will decide you are serious and will be willing to agree to sell you vehicles.
Wholesalers are the next most popular source of inventory. It is recommended that you build and maintain a relationship with a few reliable wholesalers. If you can show a hard-working wholesaler that you will be a steady buyer, that wholesaler will find better vehicles specifically for you. As a warning, title issues may increase with the use of wholesalers. Also, a vehicle from a wholesaler may have sat on a new car dealer’s lot for a week or two before the wholesaler purchased it and then sat at the wholesaler’s lot prior to being sold to you so the length of time since the vehicle was regularly driven is longer.
It is recommended that purchasing vehicles for your inventory from auctions be a last resort, although often a necessary one. The buyer for the dealership must be more experienced when purchasing from the auction. There is a greater chance that a vehicle purchased from an auction has undisclosed hidden defects. Also, these vehicles come from two primary sources: car dealers and wholesalers. The vehicles that come from the wholesalers were probably purchased from a dealership and placed on consignment at the auction. The auction wants to make a profit, the dealer wants to make a profit when he sells vehicles to a wholesaler or at the auction, and the wholesaler wants to make a profit. Why buy inventory that is marked up two or three times? Go to the source and save money.
These four inventory sources are by far the most popular sources for a dealer. There are other sources you can find if you look hard enough. With prices at the auctions being as high as they are, you need to be creative in finding new sources.
Your local newspaper can help you find vehicles in addition to those in the classified section. Watch for estate sales and auctions in your area. Many include vehicles that can be purchased for well below market prices. Scan your newspaper for legal notices, as well. City and county governments often sell their vehicles that are no longer needed, along with impounded vehicles. Sometimes vehicles are included in bankruptcy sales for firms that have gone out of business. Normally, you will be unaware of these opportunities unless you search them out.
Other good sources of inventory are banks, credit unions and local finance companies. Depending on the price of vehicle you normally stock, bank repossessions may generally be more expensive vehicles than you normally keep in inventory but not always. Credit union and local finance company repossessions tend to be more typical BHPH or LHPH vehicles and you can often develop a relationship where they will call you first when they have vehicles to dispose of.
Companies with fleets of vehicles are another good but sometimes under-utilized source. These may be rental companies that use older vehicles, utility companies, larger construction firms, etc. Some of these companies choose to sell off these vehicles when they replace them rather than trading them in. Think about the companies in your area that maintain fleets of vehicles and contact them to see how they dispose of vehicles they no longer need.
The Internet also provides potential sources for inventory. There are of course online auctions where vehicles can be purchased, but there are other sources there, as well. The Internet offers another way to access vehicles being sold by other dealers and private parties. Many dealers have been very successful buying vehicles from Craigslist, Cars.com, AutoTrader.com and many of the other sources we may first think of as places to sell cars.
The search for inventory can be a difficult one in today’s market. Prices have risen dramatically and competition for good vehicles has increased. Today’s successful dealers have found creative ways to find more vehicles.