As we look forward to the coming year, I believe there will be five key challenges that confront every dealer in their used vehicle operations.

Challenge 1: Creating a vehicle segment-specific investment strategy. This means regarding each segment of vehicles (e.g., compact cars, SUVs, vans, etc.) as distinct classes of investment opportunities, and managing them as an investment manager would a client’s portfolio.

Challenge 2: Lower cost sourcing of vehicles. Every dealer knows the difficulty of finding the “right” cars at the “right” prices. In this era of constrained wholesale supplies, it’s incumbent on dealers proactively manage acquisition costs—through the use of metrics that measure the “spread” between its acquisition cost and retail asking price, and creative sourcing efforts that emphasize acquiring cars from current customers.

Challenge 3: Faster front-line ready times. To achieve this, dealers change people and processes to meet a three-day benchmark from acquisition to online- and front line-readiness.

Challenge 4: Margin-minded reconditioning costs. It’s no longer guaranteed that $1 spent on reconditioning will yield a $1.25 return. Dealers must be more circumspect about the scope of reconditioning they apply to every car. The margins on some units no longer support reflexive, “to the nines” reconditioning work.

Challenge 5: A greater degree of transparency in appraisal, sales and F&I processes. The good news: The more your car deals and offers reflect the market, the better off you’ll be. Most buyers today expect their dealership experience to reflect what they’ve found online—and they pay more when this occurs.

My latest Dealer magazine column addresses these challenges in greater detail. You can read the article, and view a recent presentation on crafting a store-specific used vehicle strategy, at the Digital Dealer Virtual Exposition, which runs through December 11.