Press release
Dealers leave nearly £500m on the table through mispricing used cars reports INDICATA
UK dealers are on track to lose nearly half a billion pounds in 2024 through mispricing their stock according to INDICATA UK.
- Biggest missed opportunity is dealers selling their most popular used cars too quickly
- INDICATA advises dealers to trade the majority of their customer part exchanges
- Adopting a dynamic pricing strategy will increase used car revenues
The two most common mistakes that led to missed revenue opportunities were when dealers priced their best cars too cheaply and sold them too quickly and holding onto poor-quality stock for too long without lowering the price.
These scary numbers came to light when INDICATA used its real time used car pricing platform to analyse more than 50,000 used cars on sale or that had been sold by 300 UK dealer groups during a 12-month period based on sale price, speed of sale and Market Days’ Supply (MDS). MDS is derived from dividing the currently available supply of inventory by the average daily retail sales rate.
The biggest loss of over £400m was caused by dealers selling their most popular used cars too quickly at sub-30 days and at 100% market price rather than charging a premium. Meanwhile, a further £15m was lost by dealers hanging onto their older cars beyond 60 days whilst continuing to charge 100% of the market price rather than lowering prices to improve the speed of sale.
INDICATA’s recommends adopting a dynamic pricing approach on all dealer stock to optimise profits and stock turn supported by real time used car pricing data. It also stresses the importance of assessing the market to make sure dealers invest in buying the right stock in the wholesale market that is in high retail demand and keeping only the best customer part exchanges for their forecourts and trading the rest.
It recommends dealers pricing its best stock above market price to optimise profitability and to avoid selling it too quickly. If the car has not sold within the first month it should then be regularly re-aligned with market prices.
With average stock INDICATA recommends taking less of a profit premium when it first reaches the forecourt and re-pricing it regularly and ultimately selling it before incurring a loss. On slow moving stock all the evidence suggests dealers are best off trading the majority of cars rather than retailing them.
“The level of used profit being left on the table by dealers is worrying, especially when there is a restricted supply of used vehicles in the market. With used cars making such an important contribution to overall profitability dealers must commit to a dynamic pricing strategy supported by real time data,” explained Dean Merritt, INDICATA UK’s head of sales. “The worst scenario is when the dealer purchases in-demand stock and then sells it too quickly by pricing it too cheaply. Stock turn is obviously a big consideration for all used car dealers but in this case being patient and pricing a good car above market price in the first few weeks is the secret to making additional profits,” he added.