Within the last week or so you have probably seen a rise in used car wholesale prices. Now think about that.
Just 30 days ago the bottom had fallen out and people were talking about dumping inventory and going out and replacing them at lower numbers.
I’m not saying that was wrong. I’m just saying it proves once again, you have to stay on top of what’s going on and be nimble and quick to move at the right time.
As a sidebar, when you have aged inventory you are anything but nimble and quick.
What’s really going on? This business is very simple and it’s easy to understand.
Depending on the state you’re in and if you’ve been able to sell cars or not, you’re running low on new car inventory because the factories have been shut down. Nothing you didn’t already know.
Thus, dealers are trying to supplement their sales by getting into the “Program Car Business.” Call it what you want, but by and large, that means rental cars.
This is going to be interesting to watch. It was just 30 days or so ago that the rental car companies were starting to sell off inventory because they had a ton of units sitting.
Florida is leading the country in the turnaround and as that continues and Disney and others open back up, the demand for rental cars is likely to go up. In other words, they are going to hold inventory, not sell inventory. Less cars. More buyers. Higher prices.
And now to compound the issue Hertz is filing for bankruptcy. There will be some impact for sure, but nobody can predict what or for how long.
And, as other states allow their dealers to get back into the retail business, they too are going to run short of new and used inventories. Pent up demand will come into play.
Everything about our business is about supply and demand, which is all the more reason you need to pay attention, day by day, minute by minute. Having aged inventory means you will never control your destiny.
You can expect one of several things to happen:
1. The market continues with a little kick on the high side for 30 to 60 days.
2. The market finds its “watermark” and settles down quickly.
3. You’re going to overpay for some period of time. When you overpay, all the more reason to understand you still have to turn your inventory.
4. The virus has a surge and the market goes backward until things settle back down.
For the third time in this article; You cannot let your inventory age on you.
The market is always shifting. You cannot shift with it when you have aged inventory.
It has always been and will always be the Achilles heel of the automobile business.
You need to be ready to shift. That’s all I’m gonna say, Tommy Gibbs