Smart sourcing of used car has become the pressing issue for dealers. Here is the solution.
Popular news outlets are celebrating the rise of digital used car marketplaces, Vroom, Carvana and Shift - the latter recently announced its pending IPO. These companies showed that many of us are willing to buy and sell our used car without ever setting foot in a dealership. Also traditional dealers are having a good time. As the supply of new vehicles experiences shortages, demand for quality used units is going through the roof.
But where do all these used cars come from? The traditional way of filling the inventory gap for dealers is to go through auctions. Auctions offer volumes, transparency and convenience to the wholesale buyer. The issue is cost.
We will argue here that in wholesale vehicle sourcing, the shift is no less dramatic.
In his recent interview to Bloomberg, ACV CEO George Chamoun highlights the importance of trust and transparency in selling used cars to dealers.
Back in the days, the level of trust in used car has been so low that nobody would ever buy a car without inspecting it themselves. The auction groups, like Manheim and ADESA, realized that good quality condition reporting are essential to their business. They set new standards and did manage to instil some trust among worried dealers. This came with some arbitration policies, and of course - cost. It is quite the operation to get a vehicle shipped to the auction, detailed and in some cases reconditioned, inspected and then go through the physical lane.
Then came ACV. According to Chamoun, "We have over 700 full-time inspectors in all the major U.S. towns. We go to where the car is, give it a thorough inspection, and hold a 20-minute auction right from where the car is. We’re inspecting 75,000 cars a month between our three products."
It's clear that the ability to inspect vehicles anywhere plays a big role in ACV's success, and anyone looking to sustain their used car operation should pay attention. Whether you are a brick-and-mortar dealer or an online marketplace, your Gross Profit per Unit will be heavily impacted by competitive sourcing.
The first change in the traditional auction model is in the option to buy vehicles reliably online. The second change, brought about by ACV and some others, is in both inspecting and posting vehicles from anywhere.
We believe there is a third and most disruptive wave coming: the ability to not only inspect and post vehicles from anywhere - but to do so without professional inspectors.
This means, that anyone looking to sell a car - a fleet, a dealer or even a consumer - could post it online with a certified inspection report assisted by AI and verified remotely.
Technology can help remove some of the trust issues and dramatically reduce the cost of getting vehicles detailed and inspected by a professional service company. Once inspected by the seller, they can choose to negotiate a price with a buyer or go on an auction.
Dealers can start reliably sourcing their inventory from each other, from fleets, and even from consumers as part of a fully-digital trade in.
This means, higher efficiency in movements of used cars, better transparency at a fraction of the traditional cost.
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