Dealers miss out on profitable stock by targeting wrong cars, finds Liquid Fleet

Dealers struggling to find the right used cars at affordable prices may be looking in the wrong places, according to vehicle procurement and fleet management specialist Liquid Fleet.

The company’s insights respond to the latest Forecourt Foresight research from Close Brothers Motor Finance, which reported that 68% of dealers are having trouble sourcing stock affordably.

Liquid Fleet attributes this difficulty to dealers competing for NAMA grade 1 and 2 used cars or those rated 70 and above by Auto Trader, driving prices above book value and shrinking dealer margins.

Instead, Liquid Fleet highlights the profitability of grade 3 cars, which can be purchased at 97% of book value and still yield higher profits after refurbishment.

Martin Potter, Liquid Fleet's commercial director, said: "The used market has changed dramatically over the past 12 months, moving closer to pre-Covid conditions. Increased labour and parts costs have altered car grading, making grade 3 cars a smarter option than competing for grade 1 and 2 stock."

"Many grade 3 cars are still in good condition, often requiring only minor repairs such as fixing alloy wheels or bumper dents before being ready for retail. Dealers with an open mind are easily sourcing these cars at auctions, while others are excluding 60% of the market stock by focusing solely on higher grades." 

An over-reliance on Auto Trader’s retail rating is another challenge, as dealers compete for cars with scores of 70 and above, resulting in similar stock and slower sales.

Potter illustrated this with a real example involving two Kia Sportage GDI models: despite minimal differences in age and mileage, one car rated 71 by Auto Trader attracted significant dealer interest, while the other, rated 37, saw limited interest.

"In the past few months, 71% of our stock has been grade 1 and 2, and 17% grade 3. Dealers focusing only on high-rated used cars are missing out on that 17% of stock," Potter concluded.