How you could be missing out on £8,757 of profit on your forecourt
By Marc Thornborough
Today’s market is far from typical. Consumer demand is at some of the highest levels we’ve ever seen with many retailers reporting that May and June have been exceptionally strong sales months, just looking at the proxy sold data shows an increase of around 120% on the same period in 2019.
But whilst the surge in demand is certainly welcome, many of you are reporting that there is a shortage of stock and that replenishing your forecourt is now the main challenge.
All of this has led to 58 weeks of consecutive price growth, with the week of June 7th seeing a record 9.7% growth in used car prices, which presents retailers with a huge opportunity to increase profitability by keeping on top of price movements and pricing to market.
So, in this blog I’ll take you through how you can keep track of the market pricing and ensure you’re not missing out on profit from your forecourt.
How should I price my vehicles?
The simple answer is you should price to the live retail market. Right now, there is unprecedented (there’s that word again) demand from consumers for cars so there is no reason to be heavily discounting.
But how do you determine what the “market price” of a car is? There are of course several options and guides on vehicle pricing but rather than using an outdate pricing handbook we strongly advise using a live retail market tracker, such as our free to use Market Insight tool to understand supply, demand and pricing trends and how they’re affecting the market when sourcing or reviewing your forecourt. Our live retail valuation is also shown in Portal, and you can use our pricing tools, Retail Check or Retail Accelerator, to identify the right stock for your market, know what you should pay and keep it priced to market once on your forecourt. Live data from the retail market really is key to maximising margin in today’s market. It’s important to note that our valuations are dictated by what prices we see retailers pricing at, so they are a true reflection of the market and not us deciding on the current valuation of a vehicle.
Do higher priced vehicles sell?
It seems not a day goes by where a dealer doesn’t share with me an example of a vehicle they were tracking at auction only for it to go several thousand pounds above book, so they don’t buy and their forecourt dwindles a little more. I’ve even heard of retailers choosing to not restock their forecourts whilst prices remain high and instead opting to keep the profits from their sales rather than reinvest in stock.
This reticence to purchase new stock is partly down to the fear that advertising a vehicle that is flagged as highly priced on Auto Trader will mean the vehicle will be slow to sell or even won’t sell.
This isn’t the case.
In fact, vehicles with a high price flag on Auto Trader are, on average, selling 25 days quicker than vehicles with a low-price flag based on the final price position. This main seem strange but the data doesn’t lie, and the market conditions are such that buyers are willing to spend that bit extra on their next car.
Average days to sell based on advertised price within price indicator brackets
My advice is don’t fear advertising a vehicle at a higher price. That is not to say you should be overvaluing all of your stock but rather using the latest valuation tools to understand what the current retail market value of a vehicle is and where there is room to make extra profit. This also applies when sourcing stock. Make sure you are using our Market Insight and pricing tools to identify what is selling in your area and what price you can retail at. This means you know what price you should be looking to pay when sourcing desirable stock.
Where’s my opportunity?
With higher price vehicles selling well and consumer confidence at an all-time high, there has never been a better time to be in automotive retail.
But there is still opportunity to increase your profitability, hence the title of this blog!
This opportunity comes from something I’ve already mentioned, repricing your stock in line with the market. This may seem trivial but by not keeping on top of current market prices you could be missing out on thousands in profit.
Using an example, in this case a 2017 Audi A5 3-5-year-old diesel. We see that in just a few week’s its price has increased and astonishing 19%, or by £3,400. So if you had this vehicle on your forecourt and weren’t regularly keeping up to date with price changes then that is profit you are missing out on.
In fact, right now there are 185,112 vehicles on Auto Trader that have not been repriced in the last 30 days. As well as this there are 167,516 vehicles from 10,623 retailers that are priced below market average today.
If these vehicles were repriced to market then you could be seeing an additional £555 profit on each sale, or each retailer could be seeing an additional £8,757 in profit each month.
How can I keep on top of the market conditions?
Our free to use Market Insight tool is a key tool that you should be using to find out what’s selling and at what price on both a national and global level using real time data and right now it’s more important than ever that you equip yourself with this knowledge.
We launched Market Insight last year just at the time retailers closed in the first lockdown and right then it didn’t tell you anything other than the blindingly obvious. Demand was down and prices were flat as no one was making any price adjustments
However right now is the time that this tool is so invaluable as it gives you this level of make model derivative age detail and lets you see the market health on a daily basis so you can keep in tune with the fluctuating valuations as and when they happen. This means that if you use the tool regularly you will see when the market starts to cool down, right now we’re seeing no indications of this but Market Insight will give you the fore warning as we start to see this happen, meaning no nasty surprises and being stuck with vehicles with zero margin in them. Find out more about Market Insight by clicking here.