How Dealerships Actually Source Their Pre-Owned Inventory

Walk through any used car dealership and find a lot full of pre-owned vehicles meticulously washed and ready for sale. But what happens to all of these cars? While most people think of trade-ins as the main source and, yes, that’s part of it. But, there’s so much more to how dealerships stock their lots, including where a lot sources its inventory.

When buyers understand where inventories come from, they can better understand pricing and condition and where some dealerships may have the upper hand with their selection. It’s not random how they choose what gets to stay, what’s sold at dealer auction or what’s acquired from other means – there’s a method to the madness.

Trade-Ins: The Basic Source

To date, trade-ins remain the top source of pre-owned vehicles. A person wants to get rid of their current vehicle while getting something new, so they go to a dealership to trade it in for retail value on their next purchase. But not every trade-in will end up on the car lot.

Dealerships evaluate a trade-in based on age, mileage, condition and market demand. An SUV with low mileage that had great care will stay in the dealer’s possession after repairs and be sold as nearly new. However, an SUV with heavy mileage that may need repairs or a vehicle that’s difficult to sell won’t make the cut and will head to auction.

This also explains why some dealerships have better used inventories than others. Certain dealerships sell more new cars than others; thus they’re gaining more trade-ins per month. This gives them the opportunity to be picky about which cars stay on their lot and which ones can go for auction.

The condition of vehicles is relative. Some people take care of their vehicles as if they’re their babies while others barely change their oil. This needs to be kept in consideration, too. A vehicle might look good but underneath needs $2,000 worth of repairs and thus isn’t worth keeping around.

Dealer Auctions: Volume Dealer-Sourced Cars

But this is what most buyers don’t know about: the dealer auction. Cars are constantly on the other end of the market looking to auction off a vehicle or buy back a vehicle; dealer-only auctions happen daily.

Auctions receive those trade-ins that aren’t worthy to stay on the dealership lot, but auctions are also a place for dealerships to acquire new inventory. Need three more SUVs? Head to auction. Need five budget sedans? Auction it is. This is how dealerships fill gaps in their selection without waiting for the right trades to come about. Places that offer car sales perth work on additional sourcing to maintain a certain level of popular selection without relying strictly on trades.

The condition at auction is variable – from low-mileage/single-owner vehicles that didn’t fit at the time to rough vehicles that maybe weren’t treated well. Dealers experienced in buying for their lots understand how to differentiate. Those who are not? They get stuck with junkers or inventory that sits for too long because the costs aren’t worth the repairs.

Generally, auction purchases are less expensive than trade-in allowances. They are not done with a customer relationship attached but simply a transaction at face value. But there’s more risk involved. When buying a trade-in, a dealer learns about the car; there’s an invested relationship. At auction, all one has is a vehicle history report.

Direct Purchases from the Public

In some cases, some dealerships will actively buy cars from potential sellers – even if they’re not going to buy a vehicle themselves. “We’ll buy your car” signs plague lots; active websites accumulate instant quotes and the like, trying to bring in vehicles from buyers looking to sell.

This is true, especially in today’s market where competition remains high for inventory sources.

This gives dealerships more concrete control over condition than an auction would allow. They can check out the car and also gauge how well it’s been treated by its current owner. However, they usually pay higher than auction prices because they have retail competition on either side and they’re not cut and dry at dealer-to-dealer means.

This makes sense either when inventories are low or when dealers need certain vehicles. For example, if SUVs are going fast, let’s get on over to get as many as possible! Don’t wait for natural considerations.

Off-Lease Vehicles: The Best Bet

Off-lease vehicles create some of the best source of pre-owned inventory because they are typically newer, provide strict maintenance requirements through each leasing agreement, possess service records for credibility and can only have certain mileages (which cuts down on vehicle wear).

Now, when dealerships sell a lot of leases over time, they tend to gain these vehicles when people bring them back. Many off-lease cars become certified pre-owned as long as they fall within dealership specs (age, mileage, maintenance records). But this isn’t guaranteed; some dealerships sell their leased off-lease vehicles at auction looking for other dealers who want quality inventory.

On the contrary, off-lease vehicles are often more costly compared to average pre-owned vehicles because they’re newer and better through leasing requirements. This means that off-lease vehicles are typically near-new cars (lower mileage) that command higher prices.

Fleet And Rental Returns

Rental companies continually cycle through cars and sell cars after 30,000-50,000 miles; corporations use fleet vehicles that employees use before cars become worn out or before they require rental status for too long; then sell them off in bulk with dealership auctions buying in on large scale because they get better pricing.

The concern with ex-rental cars is that multiple drivers caused wear and tear rather than single-ownership attention but with strict timelines and critical breakdowns, it’s clear that these cars are often maintained better over time than one might think. Fleet vehicles generally have better oversight as they are tied exclusively to one employee usage timeframe.

These cars typically end up being cheaper than a similar vehicle with low mileage; thus they can be good value buys for those less fortunate but who still want inexpensive choices without too much of a difference – if they’ve been inspected well enough first.

What This Means For Buyers

Knowing where cars come from helps buyers ask better questions about what they ultimately want. Where did this car come from? Is it trade-in? Dealer purchased? Auction? How long have you had it? These show how involved dealers are with their inventory – and who sells what sight-unseen at auction.

Several implications ease buyer doubt based on where acquired. A trade-in gives them instant research value; an auction purchase is always iffy at best unless a quality report is provided from inspection/vehicle history/etc., or maybe somewhere in between for leasing purposes without direct insight into personal ownership.

Quality dealerships know where their inventory comes from and why by controlling the conversation; they go to special auctions, keep stringent standards about what trade-ins get kept and purchase well regardless to best serve their bottom line and customer confidence level shows when it’s clear to which dealership steps are taken when.