Most new car dealers have nearly the same type of inventory as their competitors down the road. One new car should run the same as the same new car around the corner. For used cars, it’s a little more hit and miss. For dealers that want to differentiate, they need to figure out how to price their cars efficiently and effectively in a world where shoppers are less patient and spend more time researching than ever before.
This is where pricing tools come into play for car dealers. Most of the ones currently offered by vendors are cumbersome, inaccurate, or even clunky. Newer technology is coming out from some companies that will help dealers to price their online inventory more easily, but that will also allow for better controls to bring the quality and transparency that car shoppers crave.
We don’t have a tool, but if we did, it would possess these three traits…
Consistency
If you were to ask most dealers, they are probably unaware that their vehicle pricing model is inconsistent. Perhaps they’re using a tool that pulls in market data to tell them how to price their vehicles. This is great in practice, but when the number of dealers using such a tool reaches its tipping point (which it has) then the pricing based upon market values starts to influence the pricing as a result. Prices go lower and dealers wonder how hot models would require such discounts. The reason is simple: the pricing tools are driving down the market because they’re pricing based upon the market. In a perfect world, they market would dictate the pricing, but because of the abundance of inconsistent pricing tools out there that look at market values, the pricing is no longer driven by the market but is actually driving down the perceived market. Cheaper prices yield cheaper sales, which yield cheaper prices, which yield cheaper sales… you get the picture.
The best tools will allow the dealer to examine the market based upon what’s happening at their store and make pricing decisions accordingly.
Ease
Let’s face it. Anyone who has had to do digital pricing of cars at a dealership knows that the majority of tools take too much time and too much repetitive manual input to be truly effective. This is a side-effect of an industry that has scorned automation (rightfully so) but that has not come up with many options to counteract it manually.
An inventory pricing tool should be intuitive. It should know that after this amount of time or based upon this or that market condition that the prices for a particular model or even a particular individual vehicle should go down… or even up.
Control
One could tag this along the same lines as the consistency issue discussed above, but it’s a little different. Rather than focus on bucking the market trends set forth by the tools, a properly controlled tool in the hands of a savvy dealership employee can help dealer to actually beat the market trends and sell more cars as a result.
Your pricing should not be dictated by what other dealers are doing. Rather, it should be dictated based upon the information you have at the dealership, the data that is available from outside sources, the views and impressions available in analytics, and the inventory levels at the dealership for each individual model. This is not something that an algorithm can do today, though that concept may be coming down the road. Today, it’s in the manual control that savvy dealers possess that truly intelligent pricing decisions can be made.
A caveat to control is the risk of manual mistakes, which is why we really like what Automark Solutions is doing with their pricing tool. It basically makes it impossible for someone to price a vehicle too low with safeguards in place to prevent it. They are also the only company we’ve explored that does all three important components of proper inventory pricing the right way.
How a dealership prices their vehicles is as important as which vehicles they have on the lot. In some cases, it can be even more important.