When it comes to pricing and re-pricing used cars most dealers are using some sort of a bucket system. If you’re not familiar with it, it is simply a process of changing pricing on a scheduled basis reducing the pricing as each unit jumps into a different bucket. An example would be that from 1 to 15 days a dealer has his/her inventory priced at 105% over the market and on day 16 reduces the pricing to 100%. The next bucket jump would occur at 30 days whereby the dealer would reduce the price to 95% of market and so on. In the first bucket, the 1 to 15 days, I would call that “shooting the moon” or hoping to get “real lucky.”
I would never tell you that you are wrong to shoot the moon in the first bucket, but I think you have to ask yourself are you helping or hurting the final results by doing so. Does shooting the moon slow the whole turn process down? Would you be better off to start out under the market from day one? Are you simply taking yourself out of the market for the first 15 days?
The more times a vehicle jumps into another bucket (bucket jumpers) the less likely you are not only to make a decent profit, but also the less likely you are to make a lucrative ROI. One of your goals should be to figure out how to reduce the number of “bucket jumpers.”
There are more and more dealers taking an aggressive approach with the first bucket because what they have found out is they end up selling their units faster and getting a greater return on investment (ROI.) One of the most important things that also happens with this approach is they are selling units in the “current market.” The buzz these days is all about how fast the market can turn on you. When it turns and you are sitting there with a lot of units 30 plus days old you are now at a tremendous disadvantage. Lord help you if you have 60 day old and beyond units in stock.
This is not a perfect science so to put too much stock in either position may be the wrong thing to do. There will always be that really, really hot car that you can shoot the moon with. But, when your overall strategy is to “go for it” right out of the gate you may put yourself at a disadvantage in the ever changing, fast paced used car world.
If you stay hard and firm on being over the average market price in your first bucket, you will soon find yourself drowning in a “bucket of water.” That’s all I’m gonna say. Tommy Gibbs