Move cars off the lot faster than you can drive them
The chip shortage impact isn’t limited to new car dealers and manufacturers. It’s hitting used auto dealers, too.
Rising commodity prices and a worldwide chip shortage impact franchise dealerships most directly. A slow down in manufacturing means fewer vehicles on the lot. Some large automakers had to temporarily shut down manufacturing facilities or shift production to more profitable models.
How does that impact used vehicle dealers? After all, you aren’t contracted to GM or Ford or Volkswagen or anyone else. No Hondas coming on the lot? No problem, you can sell more Toyotas.
Unfortunately, used dealerships may feel a chip shortage impact. Perhaps not in the same way that new vehicle dealers will, but it will happen. Here are things to watch out for and some ideas on how to recover.
Don’t let the chip shortage impact your dealership
Business is booming! The basic economic principle of supply and demand is working hard in your favor right now. But there’s a catch.
If it’s not happening to you already, you may soon notice the number of vehicles coming onto your lot is going down. And even if your sales are up, you can’t keep that going without something to sell.
New vehicle dealerships also need something to sell, and with the supply of new vehicles interrupted, they’re turning more and more to selling used vehicles. That’s where you may feel the biggest chip shortage impact.
Additionally, vehicles at auction may become more expensive, and the competition for those vehicles may increase. However, you do have some options for how you can respond to these shortages.
1. Increase your inventory. If you can, try to stock up on your used vehicle inventory. Don’t get in over your head financially, of course. But if you can swing it, try to get more cars on your lot, so you’re prepared for a slow down in trade-ins.
2. Buy vehicles that need repairs. If you have a service center as part of your business, you have extra room to bring in vehicles that need attention. You could get some good deals on vehicles that need a new set of brakes or a starter. Spend a little getting them fixed up, and you’ve got a nice potential profit.
3. Get in touch with your customers. Before you start to feel that chip shortage impact, contact your past customers. Find out if they are interested in trading in their current vehicle or even if they want to sell it back to you. And if they don’t, they may know someone who does.
4. Get the word out. Use your social media accounts or mailing list to advertise that you’re looking for used vehicles in good condition. Not only is this an excellent way to bring in some inventory, but it may help boost sales as people come to you and see what’s available on your lot.
5. Wait it out. It’s not the most ideal solution, but you may need to hold tight and wait out any chip shortage impact your dealership is feeling. If you find this is the case, do what you can to make your lot look full. You can also use any slower periods to work on your dealership marketing or go after partnerships with other local and related businesses, such as a car wash or auto detailing company.
Hopefully, any chip shortage impact is temporary and won’t disrupt your business much, if at all. But it’s always wise to plan ahead and prepare as much as you can.
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