Navigating Shrinking Margins: Acquisition Lessons from the Stock Market for Dealers
Josh DeYoung
February 2024 • AutoSuccess
In the world of dealership acquisitions, a fundamental shift is underway, drawing inspiration from the stock market. Stock investors have long benefited from a wealth of information and advanced technological tools, supporting them in making data-driven decisions. This stands in sharp contrast to dealers who often face the challenge of uncertainties in used car acquisitions due to a lack of comprehensive data. The adoption of a stock market-informed approach, which includes the use of advanced diagnostic and data analysis tools, is set to modernize the acquisition process in the dealership world and optimize profitability.
Traditionally, dealers have relied heavily on physical inspections and limited historical data when acquiring used vehicles. This method often leaves them vulnerable to unforeseen costs that can erode profit margins, a stark contrast to the informed decision-making process seen in the stock market, where investors utilize real-time data, historical analysis, and sophisticated tools to minimize risks.
There’s a significant technological gap between the resources available to stock investors and those used by dealers. Stock trading platforms offer comprehensive analytics and predictive tools, while dealerships have historically lacked equivalent tools for assessing vehicle acquisitions. This gap has often led to costly oversights in the acquisition process.
Modern technology offers a solution, providing tools designed specifically for the dealership industry that mirror those used by stock investors. These tools offer in-depth vehicle diagnostics, historical mechanical data, code clearance history, and cost estimates for parts and labor. This integration of technology enables dealers to make informed decisions, manage costs effectively, enhance efficiency, and build customer trust.
To address the need for better access to vehicle information, the industry is seeing a movement towards greater transparency and data sharing. Initiatives are being developed to ensure that dealers can access the necessary vehicle data without facing prohibitive costs, aiming to make vehicle data more affordable and efficient.
The practical implications of this are significant. For example, a dealer appraising a car that has cleared a catalytic converter code might proceed with the trade without comprehensive data, only to find significant mechanical issues later, leading to a financial loss. The movement towards greater data transparency helps prevent such scenarios by providing essential data for more informed decision-making.
Furthermore, tools like the OBD2 plugin tool can significantly reduce a dealership’s ‘cost to sale’ expense, adding more profit to the bottom line. In the latest revolution in this plug-in technology is how it integrates with reconditioning. This integration pulls repair and labor costs for the make, model, and year of the trade being considered. Now appraisers have actual, not estimated or averaged recon costs, to close the appraisal gap. When this gap is closed, chargebacks to sales are reduced or eliminated.
This widespread availability of data and advanced diagnostics levels the playing field, allowing even less experienced employees to appraise vehicles with greater confidence and accuracy.
In conclusion, the automotive sector is evolving, and dealers must adapt by embracing a data-driven approach and integrating advanced diagnostic tools. The move towards greater access to vehicle information and data sharing is supporting this transition, ensuring dealers have the necessary tools and data to make informed decisions. This integration of technology is not just a competitive advantage but a necessity for sustained growth and success in the dealership industry.
