Consumers have found the Internet to be a great tool to research, and in some cases, a way to gather information on their next vehicle. Some call the Internet the “great equalizer” when it comes to shopping for, and eventually buying, a car.
Car dealers use the Internet as a tool to sell too. The savvy dealers are always looking for ways to attract people to their websites, but it goes much deeper than that these days. Dealers can get real-time used car values from auctions all over the country in just seconds. These sites are not available to the public. This is why for over a year, I have talked about how inaccurate Kelley Blue Book and the other sites are, because they are never current, in what has become a volatile used car market.
One new tool available to dealers listing cars is software that allows them to look at every similar car that is for sale in their area, their state, or all over the country. This new software will tell them in great detail the going price of cars like theirs BEFORE they actually put it on- line. I know a large number of dealers using this software and it is allowing them to price their cars to sell quicker and without the traditional haggling generally associated with a used car purchase.
There are a number of these programs out there for dealers, and it keeps them from over or under-pricing their used car inventory. For the first time, they can price with confidence.
When I was in the retail business, pre-2006 we had no such tools. Pricing a used car was all over the board. We would price cars based on what we owned them for. For instance, if I owned a car for $20000, and our goal was to make a $1500 profit average per car, we would price the car at $22500 in hopes it would bring $21500. Nothing real scientific about that. If a dealer around the corner owned a similar car for $1000 less, he could advertise it for less and probably sell his car faster than I would.
Today’s dealers have the tools to be competitive from the first day they advertise a car on-line, in the newspaper, or on their websites. Dealers using this software, like Five Star Ford, are reporting an increase in used car sales of 30% or more since they began using this type of technology. They now price cars based on the current market without regard to what they own that car for. You see, in the car business, selling a car fast is the key to success.
This will be problematic for some consumers, however. Some still think that unless the dealer will come off $2000 on their advertised prices, it’s not a “deal”. Those folks are going to be mighty frustrated, those days are over. These buyers will pass on a GREAT deal because a dealer is firm on their pricing, they now have proof their car is not too high.
Predictive pricing is sweeping the auto industry even as we speak, and the systems will get even better as time goes by. Everybody always talk about what a great experience they have at the places that don’t negotiate. Get ready for that at all your local dealerships too, it is coming.
Jerry Reynolds is a nationally syndicated automotive talk show host heard all over Texas and California, including the Car Pro Show heard locally Saturdays on News/Talk 820 AM and 96.7 FM WBAP. Jerry is a member of the Texas Autowriters Association and is the automotive expert for CBS 11 TV in DFW.