Speculating by Profit Objective, Road to Purchase Plan for Street Buys
Going on nearly two years since the start of the covid-19 pandemic, we have been in recovery mode all year. But the recovery is not going as smoothly as many anticipated. The rebound to overall vehicle sales and output continued into 2021, until a number of bumps in the recovery path became evident and depressed vehicle markets – particularly in the second half of the year.
In the US, the rate of light vehicle market decline (at -16%) eased in November, but inventories remain tight – though there are signs of some easing of the chip crisis. Retail sales were below the 1 million threshold for the fourth consecutive month and fell to their lowest level so far this year, at an estimated 850,000 units.
With the semiconductor shortage showing signs of improvement, the 2021 production forecast remains at 12.9 million units, 6,000 units lower than 2020. The outlook for US auto sales has improved slightly for 2022, from 15.7 million units to 15.9 million units, an increase of 6% over 2021. The improvement, however, is expected to be more pronounced on the fleet side, which is expected to recover to 15% of total Light Vehicle sales. Retail sales are also expected to improve next year but by just 4%.
So here we are, about to close out the year with encouraging but cautious forecasts. Analysts estimate that the US market in 2021 lost around 2.4 million units due to the semiconductor shortage. Despite these struggles, industry data shows that average vehicle transaction prices continue to break records and were above $40,000 for the sixth consecutive month, adding additional risk to demand.
Which is where we shift our focus this month in our last live episode (for the year) of The Acquisition Council, our monthly webinar turned live show as of July of this year. In this episode we speculate on used car demand for the first quarter of the new year and look for signs of increasing stability, one which could be lurking in the obscure corners of your ledger - profit objective.
Earlier this year we were seeing profit objectives exceeding $3k per vehicle whereas today we are seeing that number slide down to the low two thousands and even lower. Some would suggest that this could be a sign of market stability, whereas others might suggest this is a sign of instability or even desperation.
Every buyer, dealer is going to approach their profit objective differently and we want to hear about your approach with this particular factor.
About the Guests
To kick off this episode we welcome Greg Churchill from Spokane Hyundai who joins us to discuss the importance of having a detailed process and “Road to a Purchase” game plan for acquiring street buys. Greg’s dealership was featured in our latest case study which you can download free by following the link below.
Free Case Study - Get the PDF
Growing Market Share with Cars Off the Street
We also expect to revisit the disconnect between retail and wholesale pricing whereby dealers are witnessing wholesale valuations higher than retail valuations.
Following the interview our Vehicle Hero team takes the stage with Brand Manager Benjamin Dykstra and Acquisition Specialist Chad Figurido who spend their days on the phone reaching out to consumers about buying their cars and they join the stage this month together to share some over the top buys.
And to close out the episode, Dealer Teamwork Director of Marketing Eric Miltsch joins the panel for a group discussion on strategies for acquiring vehicles for wholesale disposition, and utilizing your sales team as an acquisition team while inventory is low.