Auctions prices all over the country are on the rise. Without a doubt, the culprit in the rise of high prices is Hurricane Harvey. Dealers from the storm-ravaged areas are traveling far and wide acquiring inventory at record-breaking prices.
This sort of activity has a snowball effect on pricing for all dealers regardless of what part of the country you might be located. So what should you do?
Don’t jump in too deep.
No doubt, the law of supply and demand is currently increasing the prices you pay and the value of used cars in the marketplace. Keep the following in mind:
A. Know your market and know your lenders. The market may not be willing to reimburse you for the added values, and for sure the lenders may not be willing to advance the money you need to make it work.
B. This is a short-term blip on the map. If you think this is a “new business model” that you’re going to see for much more than 45 to 90 days, you’re going to wake up with an ugly mess.
C. Avoid jumping too heavily into the game. Now is not the time to go nuts at the auctions. Now is the time to go nuts at the front door. Up your look-to-book north of 50%. If you’re going to bury yourself, then bury yourself in a trade. You made a deal. You sold a car. You have a new customer. Dig it?
D. Amp up your disciplines. I feel the same way about the fake news I hear about off-lease cars coming into the market and affecting used car values. If you know what you’re doing, and have discipline, then most of this stuff will have little or no impact on your used car operations.
F. When you turn your inventory, the law of supply and demand will only impact you but so much.
E. Turn baby turn is what you should always be thinking when you purchase auction units, but ever more so as this “hurricane of high prices” passes. The upper level winds will eventually carry it out to sea.
That’s all I’m gonna say, Tommy Gibbs