In the world of car sales, pricing strategies—especially the debate over dropping prices or “marking down” vehicles—come up often and can get pretty heated.
The wisdom passed down between generations is that if a car is not selling, “mark it down.” Drop the price low enough, and the car will sell — so it works, right? But here’s the question: Does marking down a car actually increase the number of new shoppers?
With profit margins getting tighter and pressure on those margins rising, it’s important now more than ever to clear up misconceptions about vehicle markdowns. With a decade’s worth of data in the driver’s seat, Lotlinx covers millions of VINs and how prices can flex to set the record straight and separate the markdown myths from the truths.
Download the Free Infographic: Debunk 5 myths about marking down inventory.
Myth: Instant VDP View Increase with Any Markdown
Fact:
Contrary to the belief that marking down a car will automatically attract shoppers to your website, data shows that 69% of used and 76% of new listings see no noticeable increase in organic or direct views between markdowns. Additionally, if there is an uptick in activity, it lasts only a few days and comes largely from repeat shoppers getting price alerts.
All in all, the belief that lowering a car’s price will immediately boost interest (as measured by Vehicle Detail Page, or VDP, views) doesn’t hold up. In reality, merely trying to increase VDP views by cutting prices doesn’t necessarily lead to more sales or genuine customer engagement.
It’s more meaningful to build a real connection with potential buyers from the moment they show interest online until they visit the dealership. Instead of relying on price cuts to grab attention, dealerships should engage with customers on a personal level, improving the quality of interactions overviews. VIN-specific strategies improve car markdown effectiveness — they make for a better buying experience and help attract serious buyers (and sales) to the showroom.
Myth: A Single Markdown Equals a Sale
Fact:
The notion that one price reduction will clinch the sale is far from accurate. On average, units that sell are subjected to 3-4 price reductions before being sold. This means that the first price reduction often isn’t the deciding factor leading to a sale.
Myth: Only Aging Units Deserve Markdowns
Fact:
A common misconception is that price reductions should be reserved exclusively for vehicles in inventory for an extended period, such as 30 days for used and 45 days for new. In reality, dealers who proactively apply pricing strategies earlier tend to have a disciplined approach to inventory from the outset and, as a result, experience higher sell-down rates than those delaying price adjustments.
More specifically, dealers that make market price adjustments during the first 7 to 9 days achieve higher profitability, lower carryover inventory, and lower days to sell than those that delay. Learn more about strategies for dealership profitability.
Myth: Any Reduction Will Lead to a Sale
Fact:
It’s falsely assumed that any price reduction will facilitate a sale. However, Lotlinx data reveals that the average reduction for new vehicles stands at $1,700, while the total reduction needed to secure a sale can exceed $6,000 after a car has been on the lot for over 100 days. This discrepancy erodes profit margins and shows that less aggressive price cuts can cause issues with inventory aging.
In smaller sales, a seller might excel at selling stationery or household goods. However, moving to large, complex sales (like cars) requires a different skill set. Successful large sales focus on understanding the customer’s needs, encouraging dialogue, and tailoring solutions. For AI-driven solutions, consider Lotlinx for inventory management.
Myth: High-Value Vehicles Respond Differently to Markdowns
Fact:
There’s a belief that higher-priced vehicles behave differently in response to price reductions than their more affordable counterparts. Lotlinx data disproves this, showing that both categories require the same cadence of price reductions and a similar percentage of discounting and face the same challenges with aging.
Discover the Truth with Lotlinx Sentinel VIN Management Platform
The data-driven insights provided by the Lotlinx Sentinel VIN Management Platform debunk common markdown myths of the auto industry and pave the way for more strategic, profitable sales tactics.
If you want to understand the real impact of price reductions, manage your inventory to its full potential, and ultimately drive more sales without sacrificing profit margins, it’s time to think smart with Lotlinx.
Experience firsthand how Lotlinx can help you identify pricing strategies. Call 1-888-VIN—RISK for a free risk assessment, or email us at hello@lotlinx.com.