by Nathan Cooper, Product Marketing Manager
With news that used car values have continued to fall in May but at a slower rate, according to CAP HPI*, we wanted to look at our REALinsights business intelligence data to share our thoughts on the current vehicle stock price challenge in the market, and what car dealers can do to try and overcome the issue.
What do we see from our vehicle stock analysis?
Our automotive business intelligence solution, REALinsights, integrates with many different data sources for vehicle data, including dealerships’ DMS as well as Auto Trader, which allows us to get a national-wide view on vehicle stock trends and patterns, as well as a consistent score in terms of vehicle stock quality.
As of today, we see that, on average, 9.4% of vehicles in the market are currently overpriced. This is being seen most in the lowest quality car segment (<20 Auto Trader Banding).
On the flip side, 15.9% of vehicles overall are classed as underpriced, so dealers are losing revenue with each vehicle sold.
So, in total, 25.3% of vehicles in the market today are not correctly priced – one way or another.
How does the vehicle quality affect the current value of the vehicle?
We have just come out of one of the longest periods of demand outstripping supply for used car stock, and this caused even the lowest quality vehicles to see their price increase to nearly record levels.
For the lowest quality vehicles (<20 Auto Trader Banding), we are now seeing that, of the stock that is flagged as mispriced, 58% of those vehicles are classed as overpriced, meaning the customers are not willing to buy a car at any cost anymore – or, that customers that needed a car now have one, so demand is starting to fall. Customers now seem to be edging towards wanting better quality vehicles. If we look at the opposite end of the scale at the highest quality cars (>80 Auto Trader Banding), an incredible 94% of vehicles that are flagged as being mispriced are underpriced – so dealers are losing revenue with every deal on these vehicles.
What does this mean for the dealer network?
For the dealer network, it is a tale of two halves, for dealers that are holding lower quality stock they will see used car prices fall, and for dealers that hold better stock their price should in theory be increasing. The reality is, however, that dealers have a blend of this stock in their portfolio.
What dealers need to be able to do is quickly identify which of their vehicle stock is in which quality band, and to adjust the price to the relevant level as quickly as possible.
We believe that many dealers are now lowering the cost of all vehicles because demand is seemingly slowing down. However, it may be best to only lower some and increase others to make back the lost margin.
In doing this, average stock values will plateau over the longer term and give some stability back in the market.
What recommendations would we give the dealers who are unsure of what to do with their stock?
As pricing is so volatile at the moment, we strongly recommend investing in an automotive business intelligence solution that can give them that single view – especially platforms that are connected to their DMS and providers such as Auto Trader, as these provide the quality banding information as well as national price trends.
A good automotive business intelligence solution will marry up all your stock data from your DMS, third-party data and other relevant information and package that up in a way that allows dealers to see the stock that needs amending and make that change quicky.
As our data shows, 74.7% of stock is priced correctly, and therefore doesn’t need the dealer’s attention. It’s the other 25.3% that you need to see and make changes to.
As ever, speed is everything. So by focusing on what matters, dealers will be supported to action the right things first time, and ensure their vehicle stock pricing is optimised.
For more information on our REALinsights solutions that collated all this data and much more, contact email@example.com, or visit https://www.rtcauto.co.uk/realinsights/
REALinsights is a cost-effective data and analytics platform launched in 2021 by Real Time Communications. With over 80 out-of-the-box reports and integration into Auto Trader, Keyloop, Enquiry Max, RTC and other solutions, it has the power to combine all of a dealership’s data sources and offer a complete overview of key business metrics.
In addition to reporting on stock pricing in real time, REALinsights can offer market forecasts and bottom-line predictions based on a wide range of factors, offering instant and powerful decision support in high-impact areas.
About Real Time Communications
Real Time Communications (RTC) is a digitalisation specialist, working with UK dealerships to deliver complete, seamlessly integrated solutions for sales and aftersales. With 20 years’ experience developing and deploying software, RTC is proven as an expert in digital transformation and a growth partner for dealerships in a fast-changing industry. More than 700 franchised dealers now use RTC.
RTC’s technologies allow systems, processes and communication channels to integrate and share data in real time, leading to revenue opportunities, efficiency savings and sustainable benefits. With a full-service approach, RTC is committed to helping dealerships adopt a customer-centric model, meeting motorists’ demands with a personalised experience.