I was talking with Steve Everhart, our Inventory Analyst and have to share the conversation that I had with him because it’s just not right. Here’s what happened. We had a meeting with a dealer that is part of a larger dealer group and executives from corporate felt that dealer was pricing his inventory too high and needed to be pricing inline with CarGurus “GREAT DEAL” pricing.
I get it. CarGurus “GREAT DEAL” ratings are attractive. It makes sense that you want your cars to be great. They are great, but don’t let CarGurus or anybody else set your pricing. You need to own your inventory pricing. Here’s what we are seeing. Many dealers use CarGurus as the main source to base their pricing, just like this executive wanted, but here’s the issue. Your cars are advertised on multiple platforms, typically. So why would you handcuff yourself to how CarGurus wants you to price your cars? Let’s say you go ahead and reset your price to make that vehicle “GREAT DEAL” on CarGurus. Now you have optimized your pricing on CarGurus and you are a “GREAT DEAL” there, but you might only be “GOOD PRICE” or “FAIR PRICE” on Autotrader or Cars.com.
Know Your Inventory & Know Where it Moves
Steve and I decided to test this theory with that dealer’s account that wanted to just follow CarGurus as their pricing strategy. We pulled up a couple of cars and we tracked their sale rates and history using different variables to see how they performed. We factored in if they were heavy or light on that inventory, what market pricing was for different years, 2019s, 2017s and what they actually sell for off the lot. We looked at make, what compact cars or model we know F150s sell at this price point. We know what price point those vehicles are leaving the lot.
Here’s what we found, for many of these vehicles they were selling at 98% or 96% of market price. We went to CarGurus to see what it would take to get from good to great. In most of these cases, CarGurus says you have to go to 92% or less than market, but you know looking at your data that this vehicle would sell at 98%. Why would you give up that extra 6%? You are still moving that car, just more profitably. That same corporate guy who was frustrated on pricing, looking at your profit and loss may feel very differently.
A lot of dealers go to CarGurus and this is where a lot of dealerships get their leads. It's performing for them. However, they may be handcuffing their inventory overall. You have an inventory system, maybe it’s vAuto or FirstLook, use it. Use all the tools available to you. Don’t go to a one-source pricing strategy. Let me walk through an example. We're big on flat pricing, meaning I'm going to price your car at $25,000 and not $24,999.
$25,000 is a great bucket on Cars.com and Autotrader. So if CarGurus says to go from “GOOD” to “GREAT” you’ve got to go down to $24,872, know that you are going to miss a lot of activity at $25,000 on Autotrader and Cars.com and more margin. Instead of going from “GOOD” to “GREAT”, own your pricing and price at $25,000. Because if you go to $24,872 to get from “GOOD” to “GREAT” on CarGurus it's going to underperform on Cars.com and Autotrader and your own website and maybe your “Certified” site and any other sites where your cars are listed. You have to stop manufacturing your pricing to match any single provider, especially when they won’t even tell you how they calculate your “GOOD” to “GREAT.” Don’t handicap yourself by using any one vendor exclusively. No one else is going to value your inventory as well as you can and look out for your interests.
Ultimately, knowing your inventory and making pricing adjustments based on your own data and all the tools that you have available gives you a competitive edge. Don’t give it away.
