Car Dealer Live

Supply challenges are causing dealers headaches but there are still decent profits to be made, say Auto Trader and Dealer Auction

  • With strong used car demand and fluctuating prices, supply has come under pressure
  • Used car market could take another 18 months to get back to pre-pandemic normality
  • Auto Trader and Dealer Auction give their tips on how dealers can still turn a profit despite challenges

Time 12:18 pm, October 12, 2021

Easily one of the biggest challenges affecting dealers in 2021 is car supply.

Whether it’s big franchises waiting for new cars or used car dealers struggling with sourcing stock, the supply issue is affecting the whole market.

The effects are wide-reaching, however, with supply challenges predicted to continue to cause dealers headaches well into 2022 (and most likely into 2023) – but they can still turn a tidy profit despite enormous pressure on their shoulders.

That’s the view of Auto Trader and Dealer Auction. The two companies have appeared on Car Dealer Live to discuss the current supply challenges that dealers are facing.

In the video at the top of this story, Dealer Auction CEO Le Etta Pearce and Auto Trader’s director of commercial products, Karolina Edwards-Smajda, explained how the current situation is affecting the traditional make-up of the used car market, and offered their top tips on how dealers can come out strong and turn a decent profit.

Explaining the current environment in which car dealers are battling, Pearce said: ‘Demand is definitely outstripping supply right now. We’re definitely seeing more dealers competing for less and less stock.

‘In a normalised ecosystem, we would expect to see vehicles flowing through from OEMs, fleets and rentals, and in turn this would obviously help stimulate more part-exchanges in older vehicles to feed the independent market.

‘But due to the impact of the pandemic and new car supply issues, this flow has been disrupted and the volumes have subsequently decreased.’

She added: ‘With regard to the competitive nature of the trade environment, we’ve seen a 30 per cent increase in bids per vehicle since April and a 25 per cent increase in bidders. We were a pretty active platform to begin with, so it’s quite a dramatic change.

‘Luckily, because we’ve done quite a lot of work to bring on new vendors and stock, we’ve only seen marginal impact to stock availability. But as you can imagine, conversion rates are really, really strong, and performances are peaking. So there’s definitely a lot of impact into what dealers can actually bid for.’

While Dealer Auction has witnessed an increase in bidders and bids per vehicle, Auto Trader has seen plenty of evidence of a shortage of supply.

Edwards-Smajda explained how the firm saw used car stock in August fall by three per cent year on year.

She added: ‘One really interesting trend that has come out of this is we are starting to see some evidence of a retailer market changing shape slightly, driven by the shift in stock and age profiles.

‘When we look at dealer website traffic, we are seeing that unique users on independent retailer websites were up by seven per cent when we compare the first half of this year versus last year.

‘Over the same period, franchise websites were down by two per cent. We’ve also seen independents’ share of total sales move ahead of franchise.

Get more from Car Dealer

  • Premium stories
  • Used car data
  • Magazine early access

‘So, there are certainly some broader shifts happening in the market as a result of supply constraints.’

Also in the video, the pair give their top tips on what dealers should be doing to maximise profits despite the supply constraints, and how long it could take for the used car market to get back to a pre-pandemic normal.

Click on the video at the top of this story to watch the full interview

James Batchelor's avatar

James – or Batch as he’s known – started at Car Dealer in 2010, first as the work experience boy, eventually becoming editor in 2013. He worked for Auto Express as editor-at-large and was the face of Carbuyer’s YouTube reviews. In 2020, he went freelance and now writes for a number of national titles and contributes regularly to Car Dealer. In October 2021 he became Car Dealer's associate editor.

More stories...

Server 190