Continued economic uncertainty and volatility in the used-car market are giving dealers more reason to be careful about their inventory selection process.
Some industry experts have warned 2023 is shaping up to be a year for caution on the used-car side. Dealers may be feeling the impact of general inflation and higher acquisition costs in addition to slower traffic to used-vehicle showrooms. Those factors combined could cause margin issues for dealers into the new year.
Dealers who prefer or rely on auctions to glean inventory will be looking for sustainable options in the new year. Ultimately, the buyer base — whether it's independent or franchised dealers — will go where they feel most comfortable acquiring, said Derek Hansen, vice president of wholesale operations at vAuto, a Cox Automotive brand.
There are advantages to both, he said when I interviewed him last month at Used Car Week in San Diego.
The digital side presents itself as something that will incur fewer transportation and holding costs for dealers. Some dealers have noted how it's easier on their acquisition teams to search for inventory via online channels — a task that can usually be completed from a desktop — instead of making repeated, in-person trips to a physical auction lane.
"It becomes more apparent that digital is helping them drive more profit while still delivering the bids, the buyers and the eyeballs," Hansen said.
But that is not to put forth some idea that physical auctions are obsolete. To be certain, they are not nearly as often visited as they were in the pre-Internet age when the wholesale sector was less fragmented by digital marketplaces. But they remain crucial nonetheless.