I thought this would be a good time to discuss new vehicle pricing in the current market. I see many dealers using their pricing tool with a set-it-and-forget-it mentality. The only time they are changing their pricing rules is when the factory sends out new incentives. Unfortunately, the market is too volatile to operate this way today. I still see dealers starting their vehicles at MSRP when they have aging inventories and more allocation coming. Many dealers have been operating with floor plan credits in the past due to a lack of inventory for the past couple of years. I am now seeing dealers with quite a large floor plan interest expenses due to slow sales and aging inventories. With the current interest rates, these fees are very detrimental to the health of the store.
I recommend to my new car clients to dive into each vehicle when pricing. There are multiple reasons for this. First, I want to price apples to apples. Many vehicles may be the same model and trim but could have options driving the price up thousands. So, if we are using a pricing rule based on a percentage sticker, this could keep your vehicle from being priced competitively in the market. Second, if we look at each vehicle against exact vehicles by sticker, we can see where our competitors are priced and the age of their vehicles. It is truly eye-opening when you look at where people are pricing the same vehicle; I see vehicles priced thousands lower in some cases on the same sticker vehicle, and many of those have age to them. We need to turn these vehicles much faster today. The demand for new vehicles is waning, and the cost of new vehicles for the average consumer is becoming out of reach in today’s economy. Just think: 62% of Americans today are living paycheck to paycheck, with less than $500 put aside in savings. There are still buyers out there, but they need buyers, and with the internet, they can seek out the best value in the market.
I suggest when going into your pricing tool, open the inventory list, click on the vehicle, and then click into the pricing tab. Once in the pricing tab, click on the list. The list will show the vehicles in the market, then sort MSRP. Now that the vehicle is in order of MSRP, scroll to your vehicle. Once you find your vehicle, compare your price to the price of the other cars with the same MSRP. Look at the advertised prices on those vehicles and the age of those vehicles. Now, you can market your vehicle against the competition with an educated price. There is no such thing as “Set it and forget it” pricing. You must be proactive in this market, or you may start incurring those dreaded floor plan charges.
-Bill Raynal
Industry Specialist
billr@lotpop.com
It’s easier to do nothing — I have a “biz-within-a biz” that addresses this car-by-car. There’s more to it than just dropping the price. it’s a huge CONTENT OPPORTUNIT. (marketing)