vAuto Helping Dealers Weave Straw into Gold

April 10, 2008
On any particular moment, U.S. dealers have about $96 million worth of used cars, trucks, and crossovers sitting on their lots. And most of those vehicles will sit there, day after day, waiting for buyers that may never come.

They may be the right cars, in the right place, at the right time. But if they’re priced too high, they’re simply going to sit there, running up inventory costs for dealers already strained by the current economic downturn.

That was the situation at Paragon Honda, in Woodside, New York, where the typical used car might sit around for a year before finding a buyer – and only then, says the retailer’s marketing director, Ashley Antonio, through some whopping price cuts. But today, the situation at Paragon is quite different. In 2007, it became the No. 1 dealer in the country for Honda’s certified used vehicle program, outselling the No. 2 dealer by more than 45 percent.

What happened? Antonio credits an online service called Live Market View that gives dealers a real-time look at what’s happening in the used car market, both locally and across the country. Type in the details when a car comes in as a trade-in, and you discover what it’s worth and what it’s likely to go for on resale. More importantly, Live Market View shows what other dealers are demanding for the same car. Antonio can even see where she ranks on used car Web sites like AutoTrader.com. Much like a search result on Google, the lower the listing, the less likely a dealer will connect with a customer.

“We’re trying to bring market transparency to a place where it wasn’t there before,” explains Keith Jezek, the CEO of vAuto, the Oakbrook Terrace, Illinois, firm that developed Live Market View.

Traditionally, dealers operated in a vacuum, according to Jezek, guessing what to pay for a trade-in, or when buying used cars at auction. Then they’d typically tack on another $4,000 and put the vehicle up for resale. That might work in rural areas, where there isn’t much competition, but in most markets, consumers can quickly run comparison checks online, and then race to the best deal.

To create its database, vAuto’s servers scour the Internet, sucking in “terabytes of data” every day, says Jezek, from services like AutoTrader and eBay Autos, as well as close to 20,000 used car retailers around the country. The results are quickly made available to the 1,000 or so dealers who have signed up and are paying between $1,000 and $2,000 a month for Live Market View.

At the showroom, a manager like Antonio calls up the details on any used vehicle on the lot, which triggers a waterfall of data to be displayed by vAuto, including an image modeled after an automotive tachometer. If the tach is in the green, the price is likely to get noticed. In the red? Time to make a quick cut. As soon as the price is changed, Live Market View broadcasts the figure to online classifieds, like AutoTrader, commanding instant attention.

On average, notes Antonio, Paragon Honda has cut “thousands” of dollars off the listed price of its typical used car. In reality, transaction prices – what the vehicle ultimately sold for – hasn’t changed much because the dealership would eventually have to run big sales on products sitting around too long. And the longer that takes, the more the dealer spends on things like financing charges for its inventory.

“We’ve cut prices and increased profitability,” boasts the 29-year-old Antonio, adding that from 2006 to 2007, Live Market View helped the New York dealership boost used car volume from 1,000 to 1,500 vehicles. And this year, it’s forecasting another jump to “100-plus.”

While Live Market View was the first product of its type offering real-time used car pricing data, several competitors are moving into the niche. Such technology could soon become the norm for dealers who hope to eke out a lead in a competitive business that today provides them significantly more profits, on average, then new car sales.

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