Relearn how to convert new-car shoppers to used buyers

The tight new-vehicle supply is forcing many customers to choose between waiting for their dream vehicle to arrive someday or buying a used car from the selection available on the lot now.

The supply-demand disconnect has left many dealers scrambling to figure out how to hang on to those new-vehicle buyers. Many have turned to the order books — one of the nation's largest dealership groups said it's largely been able to move those customers into the pipeline. But dealers also are trying to sell those buyers on the vehicles still in stock on their lots, even if they are used.

And converting new-car buyers to used-car buyers both requires and fosters skills that the industry has allowed to atrophy, two industry trainers said.

It has become necessary to "retool [employees] a little bit," said Ritch Wheeler, vice president of training for the Automotive Training Academy by Assurant.

Current conditions require dealers to revisit the old retail concept of SWAT — Sell What's Available Today — Wheeler said.

Sales reps "kind of quit being those SWAT team members" under normal conditions with plenty of new-vehicle inventory and the ability to easily trade for or order a customer's chosen vehicle, he said. There was no need to pitch other vehicles on the lot.

But retailers must be ready to suggest alternatives today. If the customer's preferred car is out of stock, "let's figure out a way to make" a new or used vehicle on the lot more attractive, he said.

It can be a pivot. Modern sales staffers have the mindset of modern customers, who value personalization and transparency, Wheeler said.

Reps may attempt to meet a customer's precise want vs. finding something close enough to satisfy, he said.

At Ventura Toyota in California, convincing new-car shoppers to buy used instead hasn't presented a challenge during this hot market, said Rob van Nieuwburg, the dealership's business relations director.

But van Nieuwburg doubts that customers' willingness to move to used vehicles will last beyond the current atypical conditions.

"If I get more supply of new cars, it'll change," he said.

At Sonic Automotive Inc., new-car customers have tended to stick with those vehicles even if takes longer for them to get delivery. Sales reps at Sonic dealerships are often putting shoppers into the order pipeline, said Sonic President Jeff Dyke.

"We take a deposit and sell the car," Dyke said. "The majority of the customers are waiting and getting the new car that they want."

Sonic, of Charlotte, N.C., which ranked No. 7 on Automotive News' most recent list of the top 150 dealership groups based in the U.S., is selling a similar proportion of new to used vehicles as it has historically, Dyke said.

Both Sonic and automakers are learning how to sell vehicles in short supply, he said.

StoneEagle, an analytics firm, reported that U.S. dealerships sold a mix of 51 percent new and 49 percent used vehicles in August.

That was the lowest monthly number for new-car share so far this year, the firm said.

By contrast, the mix was 57 percent new and 43 percent used during the pre-pandemic and pre-chip shortage month of August 2019, according to StoneEagle.

Given the current environment, dealership managers should stress with their staffs the "fundamentals of what selling is all about," said Eric Melon, senior vice president of sales and head of training and development for IA American Warranty Group.

Otherwise, "salespeople will do what they're trained to do" and what makes economic sense, Melon said.

Dealerships have emphasized cost for too long, creating a situation where sales reps are "just selling price," he said.

Managers should focus sales reps on meeting customers' needs, "not necessarily what they want," Melon said. For example, a customer who desires a Chevrolet SUV could be pitched an SUV from another brand with equal or more equipment at a lower price.

Melon warned that focusing soley on the new-vehicle pipeline could leave a retailer "stuck with nothing."

It's better to try to source more used vehicles to improve inventory volume and then augment vehicle sales by pushing finance and insurance products, he said.

Wheeler stressed the importance of certified pre-owned programs in today's environment.

For the customer, new vehicles have a "trust factor," but CPO vehicles can offer similar peace of mind, Wheeler said.

If a dealership hadn't focused much on certified vehicles in the past, "now's a great time to go headfirst into the water," he said.

Another strategy involves playing to the new-vehicle brand the dealership represents.

During normal times, some dealers try to stock used vehicles from brands outside their franchise automaker, Wheeler said. The idea is to capture business from customers who prefer competing brands.

But during this shortage, "you want to lean as much into your own manufacturer as you can," Wheeler said.

Dealerships benefit by having a used selection of the new vehicles the customers were after, particularly if those used models are certified, Wheeler said.

Dyke said Sonic hadn't seen a change in its percentage of CPO vehicle sales. That demonstrates the company's ability to sell from its new-vehicle pipeline, he said.

However, Sonic stores "100 percent" have sought used-vehicle inventory from its franchise brands to offer at those dealerships, Dyke said, citing a BMW dealership that pursued used 5 Series models after running out of new versions of that nameplate.

"That's become a lot more important" in the last two months, as Sonic's new-vehicle supply fell to an average of 10 days in July and 11 days in August, he said.

It's not a universal approach though. Melon downplayed stocking up on used vehicles in one's franchise brand as a response to this market. For one thing, "some you just can't get," he said.

He advocated instead for continuing to stock competitive brands to pry away that business and to "get something to sell."

He also argued that stocking used inventory focused on a store's franchise nameplates keeps staff from learning to sell based on need vs. brand.

After all, customers often buy vehicles other than those they originally intended, Melon said. "People buy different."