Dealerships can increase traffic and sales with low-priced used cars
Dealerships that want customers to keep coming through doors and inventory flowing should focus on used car models that have fallen or risen in price over the past year.
An iSeeCars analysis of 1.8 million used car sales found that trucks and sports cars have the most negligible price differences between July 2021 and July 2022. Four of the vehicles are from Nissan (Armada, Titan , Titan XD) and its luxury brand Infiniti (QX60 ).
Other used cars that have become more affordable include the Chevrolet Camaro, Ford Mustang, Ford F-150, Volvo S90, Honda Ridgeline, and Toyota Tundra. iSeeCars analyst Karl Brauer calls such declines unprecedented over the past 18 months.
“It looks like we’re gaining stabilization,” Brauer says. “I don’t think demand is falling, but there are economic concerns.”
He says worries about interest rates, a possible recession and tougher loan requirements are mainly affecting low-income buyers. Buyers looking for vehicles may decide to buy from dealerships that sell rather rare and low-priced used cars.
July 2022 marked an overall 10.9% increase in used car prices, up from the 10.5% increase in average used car prices in June 2022. The latest price increase marks the second month of slight increases fueled by alternative fuel vehicles, primarily hybrid and electric cars. Most buyers of these models have high incomes and strong credit ratings.
The Nissan LEAF has the biggest price increase, up 43.8% from July 2021. This model was once the fastest depreciating car on the market. Rising gasoline prices and an increased lineup for the 2018 model contributed to the increase, Brauer says.
Interest in the Tesla Model S has waned in recent months as consumers turn to the Model 3 and Model X SUVs. The long wait times for the latest version of the Model S, with an estimated delivery date in March 2023, drove buyers to used models, says Brauer. The average price increased by 27.3% between July 2021 and July 2022.
Although dealerships are looking for in-demand, higher-priced used-car models that boost their profits, Brauer suggests that dealerships who want to maintain buyer traffic and inventory turnover look for value-priced models. Plus, it opens up new revenue streams in service and parts for underserved buyers, he adds.
“These cars may not have quite the profit margin (of the most popular models), but they would allow me to meet the needs of low-income people to maintain a high profit margin,” Brauer says. “If you can get one of the cheaper models for a good deal, you can probably always return it because people say, ‘I wasn’t going to buy it, but this vehicle is so cheap compared to the other models I’ve seen, I’m going to buy it.'”