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Why dealers are losing 70% of trade-ins—and how they’re fighting back
Featuring Brian Kramer, EVP of Dealer Growth and Success at Cars Commerce
Welcome to another episode of the Car Dealership Guy Podcast.
In this episode, Brian Kramer, EVP of Dealer Growth and Success at Cars Commerce, discusses what’s next for the used car market, what 2025 supply trends will look like, and explains why trade-ins are becoming increasingly important for dealers.
1. Divergent dealer performance.
Brian believes there is a "tale of two cities" among dealerships, with stark differences even within the same markets. Successful dealers excel by sourcing vehicles directly from consumers, mastering marketing, and fostering strong cultures. Even Nissan and Stellantis retailers who stick with the right processes are seeing success.
“I can see some Nissan stores that are having insane months…controlling what they can control. And I go to some independent dealers that are generating significantly more profit than, you know, many franchise stores. And it all comes down to mindset.”
Meanwhile, those who struggle often fail to optimize, attributing their problems to supply issues instead.
2. Missed opportunities in wholesale.
Dealers often sell vehicles to companies like CarMax for convenience’s sake. This has resulted in the company recording the two biggest quarters for vehicle acquisition in 2024. However, Brian highlights that while some dealers make $500 by wholesaling vehicles, CarMax generates over $1,700 per car. This suggests that many dealers are overlooking better wholesale opportunities and selling their vehicles for less than they should.
3. Data gaps skewing competitiveness.
However, dealers also aren’t to blame for many of the challenges they’re facing in the wholesale landscape—instead many are working with poor information. Many appraisal tools fail to include competitive data from major players like Carvana and CarMax, skewing market insights.
“I would challenge everybody [to look] at this very, very hard...Because I think that if you're only looking at one data source when you're appraising cars and selling cars, that you're only looking at half the picture.”
This incomplete data fosters a "race to the bottom" in pricing. Brian believes technology that leverages broader data sources will be needed to improve decision-making and, ultimately, profitability.
4. Impact of misleading pricing.
Certain dealers price vehicles below others in their market to boost their visibility on search results pages, only to use hidden fees (with easy-to-miss disclosures) to make up the difference. This tactic doesn’t just make the entire process more frustrating for the customer, it also punishes dealers who use transparent pricing.
“The dealers that do it the right way are going on a race to the bottom because they don't have all the other packages…the disclaimers, but they still have to compete in that arena with those dealers.”
This tactic is also attracting the attention of the Federal Trade Commission, which in recent years has become more aggressive toward the retail automotive sector. Brian explains that solving this problem will take technology that can determine final sales prices in dealers’ local markets compared to MSRP, an innovation he says is already in the works.
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See Brian Kramer at NADA 2025, send him a DM on LinkedIn to schedule a meeting: linkedin.com/in/bkramer1.
And don’t miss Cars Commerce at the big show, booth #1426, schedule a live demo here: carscommerce.inc/nada.
Check out the 2024 Auto Market Year-In-Review report, packed with data and insights on the trends and shifts in the auto industry in 2024 here: carscommerce.inc/insights-report.
5. Acquiring used vehicle inventory.
Electric vehicles are helping dealers address affordability challenges and tightening used car supplies. While interest rates and car prices are boosting consumers’ monthly payments, leaving many unable to purchase certain models, EVs are depreciating quickly. This, combined with great lease offers, is giving dealers more leeway to help customers find budget-friendly options.
6. Market trends and inventory tightness.
Dealers should expect used car inventory to tighten in 2025. Brian explains that the most popular age for a used vehicle has always been three years old. However, three years before 2025, production was at a standstill due to the pandemic. This means that 2021 model year vehicles will be in incredibly short supply, as will other models from the last five years,
“2025 is actually going to be tighter than 2024, if that's even imaginable. And then in 2026, we’ll start seeing [inventory] uptick, and it keeps going up until 2030 because it's that same lag.”
While inventories are set to fall to historically low levels (even falling below the ‘08 recession) in the coming months, Brian believes the industry will start seeing gradual improvements starting next year.
7. Consumer-sourced acquisitions are a key differentiator.
Major retailers like CarMax, Carvana, AutoNation, Lithia Motors, etc. have started to outperform dealers in acquiring vehicles directly from consumers, commanding a bigger and bigger share of the 15 million cars sold by owners each year.
“CarMax, they're gonna acquire 1.3 million [in 2025]. Carvana…they're pacing over 700,000 this year from consumers. So that's two million—so take two million out of the 15 million, not to mention AutoNation, Lithia, DriveWay, all the Sonic Echo Park, all these ones that are getting better and better and better at acquiring cars from consumers. That's what dealers have to fight against.”
8. The role of technology in dealer success.
Dealers will need better processes if they hope to regain their share of the trade-in market. Careless mistakes, such as pitching a sale to a client looking for an appraisal too quickly, can be devastating to the customer-dealer relationship.
“They go straight into the [replacement] selection. And I think there's this thing in the client's brain that's like, wait, can you just tell me what that thing's worth? And that's why they lose a lot of trades to like a Carvana or something.”
Above all, dealers need better technology with solutions that deliver a fast, frictionless, and transparent trade-in process. Brian believes AI-enabled appraisals and dedicated consumer acquisition platforms will be key to outperforming the competition.
9. Challenges with auction dependency.
Reliance on auctions presents risks, especially for dealers lacking expertise. With cars often selling in seconds, it’s easy to make mistakes, and auction-sourced inventory often results in minimal or negative margins.
“We see that the average auction purchase is, you know, $100 to $200 to negative $200 on the front-end profit average across the board.”
On the other hand, sourcing trade directly from customers is much lower risk and also far more profitable.
“We had a recent study that showed that it was four times more profitable, at a Honda dealership, selling the trade than it was selling the new car...in every case, it's at least double.”
Brian recommends that dealers aim to acquire a trade-in for 70% of their transactions.
10. Future-proofing dealerships.
Brian plans to focus his time in the coming months on addressing dealer pain points and ensuring they have the technology they need to succeed. By prioritizing dealer feedback, protecting data integrity, and leveraging advanced technology, tech providers can empower the industry to navigate evolving challenges effectively while also safeguarding their business assets in the age of AI and big data.
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