Dealers tap retail tech tools to fill used-car lots

Kelly Summers, general manager at Bill Knight Ford in Tulsa, Okla., is seeing a lot fewer trade-ins come into his dealership as retailers battle it out to buy used vehicles directly from consumers during the inventory crisis.

So Summers is turning to technology to give him a competitive edge in snatching up those cars and trucks before rivals can. And he's not alone. As microchip shortages and other supply disruptions crimped new-vehicle production during the past year, dealerships have increasingly relied on their used- vehicle businesses.

It has dealers more willing than ever to pay for sophisticated software tools to help them solve the inventory conundrum and stock their lots even as used-vehicle prices surge. Retail technology vendors see a window of opportunity and are investing significant money and resources to develop or acquire products to bolster their inventory-sourcing offerings. A resulting boom in product launches and acquisition deals has emerged in recent months, and experts say there's more to come.

Linking dealers directly to consumers is one popular theme of the tools. Enabling such a connection is in part behind Summers' use of a new Cox Automotive product.

"It's not business as usual," said Summers, who began testing vAuto's ProfitTime Global Acquisition inventory management tool last year. "If you're buying cars off the street, you have to be more aggressive."

Cars.com CEO Alex Vetter calls sourcing inventory the No. 1 pain point for dealers. Cars.com last week announced an acquisition deal for Accu-Trade that will enable dealers to source vehicles from each other and from consumers via Cars.com.

Vetter sees providing such capabilities as a long-term investment.

"Dealerships have proven to us that, given the right tools, they can buy and sell cars better than anyone," he told Automotive News. "I think there's an opportunity here that persists long beyond the current inventory crisis," he added.

Longtime retail technology adviser Ron Frey agrees. Frey, a former top executive with AutoNation Inc. and CDK Global Inc., predicts that these platforms are here to stay, and the industry will see more of them, even when new-car stocks normalize.

"This is not a short-term phenomenon," said Frey, president of RL Frey Inc., an automotive investment and strategic advisory firm in Portland, Ore. "Consumers are using these platforms, and this is how dealers will be sourcing vehicles in the future."

Just this month:

• Cars.com announced the agreement to acquire all of Accu-Trade, including its Galves Market Data and Made Logistics units (see story, Page 17).
• CDK Global jumped into the dealer-to-dealer used-vehicle acquisition fray with its introduction of CDK CarSource, a new online wholesale marketplace platform.
• vAuto launched ProfitTime Global Acquisition, a system to help dealers create strategies for acquiring used vehicles from multiple sources — some of which they may have seldom or never used.

Summers said used vehicles are so hot in his market and consumers are getting so many solicitations from CarMax and other retailers that he has to be on his game. He credits ProfitTime Global Acquisition with helping him strategize how to source the vehicles he wants and lean less on auctions and more on buying vehicles from consumers. Bill Knight Ford, which retailed about 1,200 new and 1,200 used vehicles in 2021, now courts customers for their vehicles when they bring them in for service, through email campaigns and on the dealership's website.

In January 2021, online vehicle-listings marketplace CarGurus acquired a majority stake in CarOffer, a wholesale trading platform founded by retail tech entrepreneur Bruce Thompson. Last summer, a dealer-to-consumer feature was added that enables dealership clients to make instant cash offers on consumer vehicles.

"If you harness the 28 million consumers that go to CarGurus, we have thousands and thousands of dealers that will make an offer on that car," said Thompson, who continues to lead CarOffer from its Plano, Texas, location.

Blake Stallworth, general manager at Bill Alexander's FlightLine Mazda-Mitsubishi in Yuma, Ariz., has peace of mind when he buys used vehicles on CarOffer's dealer-to-dealer platform.

That's where he and 7,000-plus dealerships create customized standing orders for the exact used vehicles they want and at price ranges they are willing to pay.

The platform does the rest, matching Stallworth's orders to vehicles for sale by other stores on the platform and then purchasing the vehicles and arranging for delivery to his dealership in about a month.

"With the inventory shortages, microchip shortages and prices of all inventory, having a tool like CarOffer absolutely makes it so much easier to source inventory as opposed to going to auction," Stallworth said.

He typically takes delivery on 10 to 30 used vehicles a month from CarOffer. Stallworth said he has not used the platform's dealer-to-consumer feature.

The dealer-to-consumer capabilities of such tools, however, could be underpinning a significant shift in retailing. Frey said the platforms are helping to separate the trade-in from the new-car purchase.

As consumers have more options to get offers on their vehicles from dealerships using platforms such as CarGurus or Cars.com and from large used-vehicle retailers such as CarMax and Carvana, they will be more apt to sell their vehicles separately instead of trading them as part of a vehicle purchase, Frey said.

To get their fair share of those vehicles from consumers, dealerships will have to be on the digital platforms where consumers seek to sell their vehicles, and they'll have to be aggressive to win those vehicles, he said.

Cars.com's Vetter said 11 million vehicles change hands annually through private-party sales. Those sellers often bypass dealerships because they want transparency, efficiency and easy ways to sell their vehicles for maximum value. With its new acquisition, Cars.com should be able to help dealerships deliver that transparency and ease and move a big segment of peer-to-peer sales into the dealership retail system, he said.

Dale Pollak, vAuto founder and Cox Automotive executive vice president, said the two most traditional dealership sources of used vehicles — trade-ins and off-lease and retired fleet vehicles sold at auctions — have been curtailed because of the chip shortage.

That has forced dealers to acquire used inventory from sources many aren't that familiar with — for instance, from other dealerships or customers whose vehicles show up in their service lanes, Pollak said.

"Some dealers have been acquiring vehicles from these channels for some time, but nothing like the number of dealers who have been [using the channels] in the last year and a half to two years," Pollak said. "There aren't enough trades and vehicles at auctions."

ProfitTime Global Acquisition is underpinned by a suite of dealership inventory management software offered by other Cox Automotive units, including VIN Solutions and Kelley Blue Book with its Instant Cash Offer tool.

Cox Automotive, which also owns auction giant Manheim, isn't done expanding its offerings in the inventory software space, Pollak said. The company is readying a new program it calls Upside, which guarantees dealerships a profit when they wholesale vehicles by absorbing any loss on the sale, if there is one, Pollak said.

Dealership management system giant CDK is jumping into the dealer-to-dealer used-vehicle acquisition fray in part to help its dealer customers save time retailing the vehicles they acquire, CDK Global COO Joe Tautges said.

CDK's new online wholesale marketplace platform, CDK CarSource, will integrate with the DMS platforms of its 9,100-plus dealership customers, Tautges said.

The information a dealership enters into its DMS about vehicles it takes as trade-ins populates CarSource vehicle listings automatically, if the dealership chooses to post those vehicles for sale. The catalyst for developing the platform was CDK's focus "over the last several years" to help dealers cut costs and make more money, Tautges said.

But "with the chip shortage, [CarSource] is coming out at a time of need, and that's pretty significant," he said.