The 'Best Price' strategy

Hang tough, there's a lot of used car business jargon that we will do our best to explain.

  1. Market day's supply

Similar to Day's on Market (a term you may have heard when buying or selling a home) this metric measures market supply/demand data on specific used cars, and offers a thumbnail read of their desirability among potential buyers. The goal: a 60-day market day's supply for your entire inventory of used cars. The benchmark should guide, but not strictly define, a dealer's used cars acquisition strategy. Broadly, used cars with a market day's supply of 60 days or less are often retail no-brainers; that is, the balance of supply and demand data suggests these used cars will sell quickly. However, used cars with a 90+ day market day's supply can also make good sense as retail used cars, depending on a dealer's ability to acquire it for the right cost and align the used cars pricing for the retail customers. The key here is striking an inventory-wide balance between highly desirable and less desirable used cars. In general, the 60 day supply of used cars on the lot will indicate a well-balanced inventory of used cars in NH.

  1. Cost to market

The reality of the NH Used Car market is that margins are shrinking and have been for years. Dealers in NH have found the set costs associated with reconditioning and selling used cars has been going up. What this means for dealers in NH is that used vehicles must be evaluated for condition and value before being purchased for their car lot. When they do purchase used vehicles it is important to pay the lowest price, period - in order to be able to provide the best retail price to the consumer and still be able to make a fair profit.

The benchmark: Dealers should aim for an 80 percent cost-to-market metric for their used cars inventories.  This means the dealer can service, recondition, and prepare a used vehicle in NH for a retail consumer and then hopefully price the vehicle lower than the market averages to make a quick, profitable sale where a NH dealer can find their  front-end gross profit goals. This benchmark will guide the NH used car dealer Vehicle Acquisitions Department to ensure appraisers and used car buyers can readily understand the relationship between the acquisition price, other costs (e.g., reconditioning) and a used cars likely gross profit potential. The old saying "you make your money when you acquire a used car" remains true today, however, the majority of the value is passed on directly to YOU! The used car consumer in New Hampshire.

  1. Price to market

Okay, enough with the pricing principles and jargon, how do you pick the number? This metric compares the asking price of a used cars in NH to the prevailing prices of similar used cars available in the NH used car market. Since most listings on used car search engines like Autotrader and Cars.com and Carfax Online have paid advertised listings, it's important for us to price our vehicles lower than the competition that is paying to be found by the consumer. This way of pricing gives us a chance to earn the eyeballs of consumers online, and hopefully, entice them to walk through our doors. The only way a used car dealership can be successful and profitable is to create a great experience for their customers and offer them a price that is so much lower than the rest of the used car market in NH that they have no choice but to buy the vehicle of their dreams before somebody else does!

Example: A vehicle with a 90+ day market days supply might be priced 5 percent less than competing units (a 95 percent price to market) during its first seven days as a retail unit. The 5 percent discount reflects the unit's lesser degree of desirability because the market days supply metric suggests a high degree of retail competition. If the used car doesn't sell in a week, a NH used car dealer would adjust the pricing to 90 percent price to market for the next seven days. The cycle typically continues until the used cars sell.


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