With new-vehicle margins compressed between $1,200 and $1,400 for non-luxury stores, dealers are looking for additional opportunities in the used car market.
That effort starts with acquiring quality inventory.
Driving the news: During Daily Dealer Live, Rob Ruth, president and owner of Bob Ruth Ford, Brooke English Guy, general manager at Coastal Chevrolet Cadillac Nissan, Charlie Spradlin, general manager at Art Moehn Auto Group, and Frank Knox, chief operating officer at AutoAcquire AI, joined host Sam D’Arc to discuss their strategy for acquiring vehicles in today’s market.
The roundtable, featuring dealerships of different sizes, explained how they are looking outside the auction for vehicles, including their service drive and customer database.
Developing buy center: Ruth explained that his dealership sells eight used cars for every new one, and because his store needs a consistent source of vehicles, he created his own buy center instead of relying on auctions.
He said auction fees are rising and competition in lane is increasing, and that he finds his best inventory investments in trade-ins and the worst at auction.
“We’ve got this machine that we need to feed. We had to find another source,” he said.
With the buy center, they’ve now moved from 200 sales per month to the mid-400s, with the shop buying 55 cars out of the service lane last month.
Replacing every car: Spradlin, meanwhile, said his store’s standard is to replace every car they sell.
That effort starts with the service drive and customer database, but they still rely on the auction for 30% of their inventory.
“Can we make a strong offer quickly? Is it someone who’s been here recently, been in the service drive recently, we’ll go out, we’ll attack that first,” Spradlin said. “If not, then we need to find it on the auction because either way, I have to replace it.”
When they go to auction, he explained it’s still profitable because his internal, trained buyers know what they’re looking for.
He also has minimum profit and average recon thresholds, and a person is in charge of making sure vehicles are reconditioned correctly, and comebacks are limited.
Putting someone in charge: English Guy borrowed advice from Ruth and hired a full-time employee to acquire inventory.
“We have someone now for two months that’s been doing that full-time,” she said. “He mines through AutoAcquire, Facebook Marketplace, all those places. We’re still buying from the auction, but the goal is to reduce that significantly because we all know how much of a pain in the neck it is to buy from the auction.”
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Using AI in acquisition: Knox described the challenge for dealers needing to look at thousands of vehicles to find the right one.
As he put it, manpower limits the ability to touch all the customers in your service drive, with many dealers connecting with only 30% to 40%.
Knox said that leveraging AI dealers can put thousands of offers out to customers each month and have follow-up conversations to compete with some of the industry’s largest players.
How it works: AutoAcquire AI’s agent is Roger, and it contacts customers by email, text message, and phone calls when the repair order closes and states, “Hey, I just want to buy your car.”
Ruth explained that AutoAcquire's AI allowed them to communicate with 100% of their customers and express interest in buying their vehicle.
He also added that the store’s agent monitors the conversation Roger is having with a customer and then takes over when needed.
Knox similarly added that each store has their own agent to calibrate the proper cadence for reaching out to customers and the messages sent.
No concerns about friction: Spradlin downplayed concern about friction with customers about the offers.
“I just think that customers are so used to getting bombarded with text messages, political texts, phone calls… If your offers are set up in a way that's aggressive and strong and not insulting, because that's that is a key, they’re not going to be offput when you reach out and say, ‘Hey, your car is on my hit list.’”
Spradlin said he makes aggressive offers and would “happily pay” 95% to 97% to someone in his service drive.
English Guy agreed, pointing out they are competing with CarMax and Carvana for the vehicles.
“If they can’t get that number from their local dealer, then why on earth would they continue to buy from us?” she said.
Building a plan: Knox said a really good service drive converts on 5% of its offers.
“I’m more concerned with the 95% that left. I need to make sure that the follow-up is in place,” Knox said.
With consistent follow-ups, he’s found that customers who receive offers in May come back in September and October to sell.
Ruth added that the AI agent does the heavy lifting on the outreach, making more than 21,000 calls and 24,000 texts, and his people pick up where there’s an opportunity.
Bottom line: Knox notes that vehicle acquisition is a full-time effort that requires the right people in place, along with the right technology. “It’s not a passive behavior when it comes to acquiring a car,” he said. “It has to be proactive.”
His final message on acquisition is, “There are no bad channels. There’s just bad strategy.”
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