Used dealers embrace multichannel stock sourcing

Used car dealers have transitioned to a multi-channel strategy for stock acquisition following the coronavirus pandemic, according to Nextgear Capital.

Results from the stock funding provider’s latest dealer sentiment survey shows that the majority of dealers plan to continue the diverse approach to stock sourcing they have adopted in response to lockdown measures and stock shortages over the last twelve months.

The pandemic has had a profound effect on dealer buying behaviour, with businesses turning to a variety of sources in order to keep their forecourts stocked up.

Liam Quegan, managing director of Nextgear Capital, said: “With physical auctions closed, the mass migration to digital channels was inevitable, but it’s interesting to see that dealers have turned to a variety of channels aside from the auction platforms in order to find stock during the last year.

“The question has always been what will happen when the traditional lanes reopen and whether the new behaviours established on the back of Covid-19 will hold true, and I think this snapshot indicates change is long-term for a significant proportion of dealers.”

Around two-fifths of the dealers polled say they have used digital-only auctions more in the last 12 months, and 44% report having bought more stock direct from consumers than they did pre-pandemic.

Fleet and manufacturer direct channels have also experienced an uplift in activity with 31% of dealers saying they have used them more, and the same number have made more use of trade sources.

When asked about their intentions for the future, 42% say they will make no change from their current activity. More than half said they expected part-exchanges to play a more prominent role in their stock sourcing activities, almost two-thirds expect to be sourcing more direct from consumers, and 38% expect to use digital-only auctions more frequently. 

Fleet and manufacturer channels will continue to attract more business from a third of dealers, while 28% intend to buy more from the traditional auction houses.

Quegan added: “The increase in those buying from manufacturer and fleet direct channels is indicative of the rising volume of stock now bypassing the traditional wholesale channels, while the number turning to private sellers suggests fierce competition for the best stock is driving many dealers to search outside of the wholesale market to keep their forecourts filled.

“For dealers, the increase in choice is a good thing but it does come with some administrative burden, particularly around how best to finance stock purchases. Independents in particular need to be careful their arrangements are flexible enough to cope with this new multichannel norm. Those reliant on captive funding may struggle to be agile enough to compete effectively in what promises to be a heated market.”

Used car values have reached a “tipping point” with prices rising for the first time in five months as an easing of COVID-19 ‘Lockdown 3’ retail restrictions draw nearer, says Cap HPI.

The automotive valuations experts claim that March brought a 0.1% value increase at the crucial three-year point following a series of drops at an average of 2%.