What Can Your Dealership Do When the Used Car Value Crash Happens?

An insightful article in Forbes details the rise – and expected fall – for used car values. Interestingly enough, the article chose the wording for the headline to include “crash” and “brace for impact.” There is no doubt that the used car market could follow the real estate bubble explosion of a not-so-decade-ago. Dealers are buying at high (sometimes over MSRP) prices, inventory is scarce (both new and used), buyers are leaning towards used (to avoid depreciation and lack of new vehicles) and lenders are buying deep to keep funding loans.


According to the article, this bubble is about to burst. That will leave both dealers (who are in too deep on vehicles financially) and consumers (who bought too high) experiencing hits in deprecation as manufacturers ramp up production and used car values settle down. Definitely not something the automotive retail market wants -- whether you are the seller or the buyer.


The concerns that I have are that these used cars are being flipped so fast that dealers cannot afford to invest the time to get safety recalls fixed before selling them. Dealers are scrambling to get the inventory just as fast as the consumers are gobbling it up. Eventually, however, dealers may end up with a bunch of unsold used inventory on which they are upside down, with consumers even more so.  


Regardless of when it happens, chances are that many consumers are going to end up with vehicles that have open safety recalls… and franchise dealer’s service departments will be even more inundated with service work than they are now. And this doesn’t even include parts availability. Sound like a familiar situation? We STILL haven’t replaced all of the Takata airbags.


This is the PERFECT time to scour DMV registration databases to get information about new buyers in your PMA that have open safety recalls. These consumers may not have any idea that their vehicle has one, and your dealership could be the first to reach out and inform them. That effort could easily translate into a long-term service customer. In addition, you will have a “heads-up” on what safety recalls in your area need servicing, which gives your dealership an advantage for acquiring parts before your competition.


Inevitably, these consumers will be contacted by your competitors attempting to gain this service business. If, however, your dealership is prepared with parts and shop capacity, you can win that business. Imagine being the dealership that can tell the customer “Yes, we have the parts, and we can fix it,” versus being the competitor that says, “We can fix it, but we have to order the parts.” Translating that into sales, that’s like a dealership saying yes, we have the car versus no we don’t.


Who knows? Some of those recalls could turn into service-to-sales opportunities. Either way, it’s a win-win for your dealership to get ahead of the game. In one way, you could easily gain a service customer, and, in another, you might even gain sales through either taking a customer out of service into sales or through referrals.


Being first to the game and having all of the equipment will give you an edge that may translate into a ton of revenue

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