Central Planning and the distruction of the marketplace

With the government’s interference in the marketplace last year with their Cash for Clunkers program and the constant threat that the administration is seeking CAFE standards for higher and higher mileage for vehicles produced by GM, Chrysler and Ford, the writing on the wall is this: Produce more hybrids at a higher cost whether people want them or not! Then, of course, they’ll use tax payer’s dollars to subsidize other schemes to have manufacturers make electric (read, coal powered…where do you think the electricity is coming from?) vehicles with almost no range and incredibly long charging times. Central planning didn’t work in the Soviet Union (or Cuba) and it certainly has no place in this country!

What does this mean for the dealerships that have survived the latest chopping block? There will be an increased demand for used vehicles. It’s pretty simple. When the natural laws of supply and demand are tampered with by central planning, pent-up demand for that which is not dictated by the Federal Government emerges. The used car market is already growing beyond what we have seen in the past. The lack of low-priced used cars, because of their removal from the market place, has made the price of used cars increase. Regardless of what your political stance might be, history has shown over and over again that government interference in the market alway (not sometimes, but always) produces unintended consequences that screw the market up. You might argue that they are intended. If so, who are these congress and senate people really? Are they so addicted to power that they will tout programs that they know will destroy the market just because they can package the argument to ‘sound good’ so they can get re-elected??!!

My only advice to dealers here is that you need to make sure you have the very best processes in place to positively ride this demand. If you are not using some form of inventory optimizing program (VAuto, American Auto Exchange or First Look), then you better at least perform these functions manually in-house. If the consumer’s eyes are not seeing your inventory, you will not get your piece of this growing demand. Or, the piece you do get, will not be the market share that your competitors are getting.

For the smaller dealers who do not have VAuto or AAX, but do use Cars.com, you should religiously look at the ‘Star Report’ that Cars.com has on their dealer site so that you can monitor the supply and demand of specific year/make/models.  This should be one of your guides regarding what you keep in inventory and how you price them…based on actual supply and demand, not what your used car manager’s best guess is.

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About dealerite

National affiliations of professionals who are engaged in changing the culture of the automobile retail business. Key focuses currently include Compliance, Behavioral Marketing and Phone Skills.
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