A seasoned approach to sourcing stock

For dealers, the shift in seasons marks a shift in the opportunities offered by the market. Keeping across the seasonal trends can be key to informing stock sourcing decisions and driving profitability.

We look at how dealers are adapting their stock sourcing strategies based on seasonal factors and the impact this approach can have on their business.

The used car market has always been shaped to some degree by seasonal factors but how important is seasonality to the modern-day car dealer?

Well according to our latest sentiment survey, it’s still very important indeed with nine out of ten dealers surveyed reporting they changed or adapted their stock sourcing strategy based on seasonal factors.

Seasonality still driving stock sourcing decisions

For dealers factoring seasonality into their stock sourcing strategy, around two-thirds of them did so to either cash in on seasonally appropriate vehicle models or to avoid holding onto over aged stock.

Selling cars suited to a specific season makes fairly straight forward business sense. Take the back to back seasons of winter and spring and you will see logical and lucrative trends emerge year after year.

With the first icy blasts of winter, the thoughts of consumers in the market for a car will be immediately drawn to SUVs, 4x4s or utility vehicles. It’s a logical progression for UK car buyers, particularly given our obsession with the weather, to search for something that keeps them moving even in the most adverse conditions. Add in the huge surge of popularity of SUVs and you have a winning formula for the winter months.

Fast forward into spring and as the nights get lighter and the sun gets brighter, car buyers thoughts turn to convertibles, roadsters and sports cars. It’s no surprise that drophead values go up as the temperatures rise. These are proven trends that dealers can confidently follow to shape their stock sourcing strategy.

Majority of dealers use stock ageing policy

Similarly, when it comes to using seasonality to shape their stock ageing policy, dealers are again on board, according to our latest survey results.

It’s an encouraging sign as a robust stock ageing policy is a key component of a dealer’s armoury. Switched on dealers know to avoid holding onto the stock for longer than is necessary and December, when the latest sentiment survey questions were posed, is a key strategic month.

It’s a time when dealers are both metaphorically taking ‘stock’, as they assess the year gone by and plan for the year ahead, and literally take stock, as they begin to replenish stock levels ahead of meeting demand in the new year.

In fact, one-third of the dealers surveyed said they did exactly that as they built up stock levels in December ahead of 2020. The end of 2019 was a good time to do it as recent data from CAP HPI, showed the used car market delivered its strongest December performance since 2012.

However, not all of the dealers surveyed took this strategic view. One in ten admitted to having no stock ageing policy in place or did not source stock based on seasonal trends.

Those who choose to reject a stock ageing policy run the risk of losing track of their numbers and with it an effective measurement of the true cost of overaged stock left for too long on the forecourt. With no gauge of average stock turn in place, such dealers are likely to experience reduced profitability and impact the long-term financial health of their business.

Dealers on trend with seasonal factors

For most dealers being in tune with seasonal trends is a key component of their overall stock sourcing strategy.

Whether it’s cashing in on seasonally appropriate vehicles, reducing overaged stock or maximising the opportunities afforded by key market milestones such as annual plate changes, it’s important to consider all seasonal factors.

Dealers using a seasonality-based strategy aligned to a stocking plan that delivers well-managed stock turn, are best placed to develop financially robust businesses that deliver greater margin and profitability.

Dealers combining instinct with valuation tools to identify the best stock

5th March 2020

Two-thirds of dealers are relying on a mix of business instincts and valuation tools to ensure they source the right stock at the right price, according to the latest NextGear Capital survey results.

Those dealers surveyed that are combining instinct with a variety of valuation tools are doing so in order to help gain a ‘clearer picture’ on pricing.

The most popular valuation guide is Auto Trader with eight out of ten dealers surveyed ranking the platform highest amongst those tools most regularly used.

Just over two-thirds of dealer said they used company data or trusted valuation guides such as Cap HPI or Glass to inform their pricing decisions.

Competitor websites and trade to trade online platforms scored lowest of the valuation tools used by dealers in the survey.

Pam Halliday, NextGear Capital Sales and Marketing Director, comments: “It is encouraging to see dealers using a mix of valuation tools to complement their business instincts when determining stock sourcing and pricing decisions.

“While dealers know their own businesses better than anyone else, relying solely on instinct to be profitable is a risky strategy. The majority of dealers surveyed understand this and are using established tools such as Auto Trader and other valuation guides to gain the clearest possible picture when pricing and buying stock.

“By taking this approach, dealers can obtain valuable insight into the vehicle price, trends and supply that will enable them to source the best possible stock at the best possible price.

“It is also interesting to see how trade to trade online platforms are scoring low on the list of valuation tools used. This is not unsurprising given their relative infancy in the market and we expect to see increased uptake as they become more familiar with such platforms.

“Overall, dealers using data-led strategies, including valuation tools, to understand both the market and their own business are most successful in generating maximum profitability.”