With vehicle inventory low, many dealers have to place a heavier focus on used cars to stay in business. In the current market, dealers are frequently outbid by other dealers for decent used vehicles or, more likely, are forced to pay thousands over retail value to acquire inventory. Add into that cost any auction fees, transportation, recon, and detailing, and … well you get the picture.
Some larger pre-owned companies such as Carvana bid against themselves to acquire a vehicle. Insane!
Dealers now have to turn inventory faster to avoid additional costs. And therein lies a problem. Dealers can miss out on acquiring used vehicles because of price. And, with fewer new vehicle models to entice customers to trade, dealers have also lost the best way to acquire front-line used vehicles via service or trade-ins.
As a result, once again recall completion rates fall as used inventory needs to be turned as fast as possible. So many dealers don’t complete the recall work before selling on to a customer, as it is not currently required by law.
Well, that might be about to change. A recent article by the Detroit Bureau discusses these challenges and upcoming legislation that will require by law that recalls are fixed for used cars before being sold to a new customer. According to the article, 40% of used vehicles sold at retail have at least one unrepaired recall. Legislation is being pushed in Congress to put the recall law into place, spearheaded by Sen. Blumenthal, with support from Senators Edward Markey and Elizabeth Warren, (who both co-sponsored the bill). Considering the current political balance of power, this bill has a far stronger chance of passing into law than in the past.
The National Automobile Association argues against this legislation, feeling it would be harmful to dealers by essentially creating a “trade-in tax” that would devalue used vehicles. Consumer advocates don’t agree with NADA. One stated, “I doubt many drivers would consider door latches that might fail, airbags that might not deploy, seat belts that might not work, engines and brakes that might fail, and other serious safety defects our investigation routinely revealed as ‘minor’ problems.”
What a conundrum! I am all for dealerships making money and understand these are tough times. Dealers are paying more for used cars than ever and are being forced to turn cars quicker.
But the bottom line is that any vehicle sold should be safe for the consumer buying it. So, what is a dealer to do? I would love to hear some thoughts on this subject