Pent-up demand that is not converting
What I want to go over is the mindset of managing inventory, a car versus a lot, a 20 grand car versus 2 million in inventory, or if you're a dealer group, 20 million in inventory. But let's go over market trends first, because it's been a little weird. One, gas prices. We're actually starting to see them go down, and we'll see where they go. That's in limbo with this administration and everything happening right now. But it really seems like there's been some pent-up demand: customers shopping but not pulling the trigger. We've seen a lot of dealers with leads going up, or SRPs and VDPs going up and leads staying the same, but sales softening. I think a lot of it has to do with gas prices. People are looking but not spending the money yet, waiting for a guarantee that gas is going to keep going down. You also had a new Fed chair who was supposed to come in and maybe lower rates, but obviously they're not going to do it day one. So I think there's some pent-up demand waiting for that.
In the meantime, there are some really good new car incentives. So late-model, high-dollar used cars are a lot of what we see sticking around on lots right now and causing slowdowns in dealership inventory.
Shoppers down 30%, listings up 100,000
In our LotWalk software we've got Market View, where we look at Google Trends for interest in used cars. On a 12-month period, the peak hit in March for tax season. That's the 100 mark, and March 29th was the highest shopper index. Then it dropped down to 69 or 70. So a 30% drop in shopper count. At the same time, used car inventory levels on AutoTrader and Cars.com have gone from 1.4 and 1.2 million around that March date, up to 1.47 and 1.33, and now to 1.5 and 1.3 million. So there's been a 30% drop in shopper activity and about 100,000 more used cars listed on these websites. More cars, less shoppers.
Where dealers are stuck: the 16-to-30-day car
What we're finding is a lot of dealerships are struggling on that 16 to 30-day-old car. It's old enough that you should start getting aggressive. It's been there two weeks, you tried to make some money on it, you want to make adjustments. But a lot of times dealers aren't making the adjustments they need because they're competing against a lot of older cars that are just starting to get blown out. Over the last couple of months we've seen dealers holding their pricing, lowering and raising it. I went over that in one of my last videos about two weeks ago: you're at 90% of market, of what? Guys raising their prices. Customers weren't falling for it. Now I think a lot of dealers are dropping their prices. So that 20-day-old car either has to compete with these 100-day-old, 90-day-old cars and drop its price, or wait until those cars leave.
One way to validate that is CarGurus. The amount of 0 to 30-day-old cars has increased quite a bit since the beginning of the year, from 680,000 to over 800,000. But the kicker is that a lot of those 0 to 30 cars, as they build up, are now building up in 30 to 60. They're bleeding through, and you can see 30 to 60 building up also. All this fresh stuff dealers bought over the last two months is sitting. What's leaving the market is the aged stuff. Customers aren't dumb. They're looking for the deals. There used to be 700,000 cars over 60 days old rolling into January through that slower winter. Now it's down to 524,000, and it got as low as 460,000. So customers are shopping, but they're being smart and pulling the trigger on the cheap deals, the great deals. Those are the ones leaving. Inventory levels stay the same, the old cars leave, 20,000 new ones come in, and those 0 to 30 cars bleed into 30 to 60. That middle bucket, the 30 to 60-day-old car, is where it's tough for dealers to make decisions.
Two-week sale rate: 50% at tax season, 37% now
We also track Black Book data, and when we combine it with the retail data, the red line is the shopper index going back five years or more. It peaks at the end of March and then drops that 30%. What happened to our dealers' volume, the two-week sales volume across hundreds of dealers all over the country? The tax season peak was 50% this year. That's a two-week sales volume. If they sold half their inventory in two weeks during tax season, our dealers are on track to sell 100% of it in a month. Some sold way more, some sold less.
Why does the 50% matter? Go back years in that tax season window. 2021 isn't fair, that was the COVID peak, a 60% sale rate, so dealers were selling 120% of their inventory. By 2022 things softened, 49% was the peak. By 2023 we got back to somewhat normal, 54% in March. Then 56% in 2024, and 55% in 2025. So year over year, tax season is down 5% in two weeks, or 10% for the month. And by this time of year in 2023, the two-week sales cycle was at 44%. In 2024 it was around 46%. In 2025, around 44%. Mid-40s. What we see now is we're down to 37%. That's a pretty substantial drop in volume.
Now, we have updated that, and we're seeing a little bit of an uptick in the two-week sales cycle, from 37 to 39, because the shopper index picked up a little. I think that's where the pent-up demand was. People were looking and holding out, waiting to see where gas prices and interest rates go, and new car deals are doing well. Interest goes up a little, volume goes up a little, but the customers are buying those older cars, the great deals. So you've got a 20-day-old car, and either you compete against these 90-day-old cars on price, or you hold out because you're not going to drop it a grand at 20 days to compete with the guy blowing his out. And so your cars bleed through, and that's what we're seeing: a lot of middle-bucket buildup.
Dropping $10 is not a price adjustment
I just had a dealership we talked to where we cleaned up a lot of their inventory. Things were starting to look good, but that also caused some pain and they lost some gross, so they softened up on their pricing policies. I'm seeing a lot of dealers drop just a couple hundred bucks instead of the $500 they usually would. By not dropping enough, you're not keeping up with the market, and customers are just going for the better deals. But you don't want to take the hit. You paid up for these cars coming out of a strong March. You owned them in April and May, and a lot of what came in during May was bought when wholesale was still kind of high, and now it's softened. So a lot of May was dealers not making enough adjustment to get these cars moving. Just today, the first three cars I pulled up with a dealer had gone from 97 to 99 percent of market, or 99 to 101, or 96 to 97, all within a day or two. All May everybody was hemming and hawing, and now it's like, all right, we've got some stuff to clean up. Let's start making adjustments, and dealers are dropping more drastically.
A good example: VinCue has a nice way to look at price adjustments, and you can do it in vAuto too. This happens to be a 2025 Equinox, and I'm not picking on this store. In the detail view you can see this car go from 24,500 to 24,000 to 23,800. Just a $150 drop. Another goes 25,600 to 25,200, less than a $200 drop. Another, 26,499 to 25,900 to 25,500. Another dropped 40 bucks. Not a big move. Another was 26,880, then 26,680, dropped 10 bucks, raised the price, raised it again, lowered it 10 bucks. Very sporadic. Another: 26,780, 26,980, 26,970. Really no adjustments. These cars have been sitting out here, and either the dealers don't want to take the hit, or they're just playing around with the numbers.
Three prices for the same car
Add to that what we're seeing online with fees, which I covered last time too. Dealers' retail pricing with fees is sporadic and all over the place. This one vehicle, for example, had a retail price around 19,100 on the dealer's website. Their best price after discounts was 17,995, but adding their fees it was 18,794. On Cars.com it showed at 17,995, and when you clicked on it, it jumped to 18,794, because Cars.com had their fee at $799. On CarGurus it was 18,795, because CarGurus had them at an $800 fee. So is it an 18 grand car, a 17,995 car, or an 18,794 car? And where is the inventory management tool pulling the price from? If I'm at 18 grand competing against this dealer, am I competing against the 17,995 price and I'm at 100% of market, or against his 18,794 with the fee, where now I'm at 95% of his price?
There are just a lot of inconsistencies in the market prices out there. Check with your inventory management tool and see what pricing they're pulling. Do they pull from the dealer's website? Does that website include fees? Is it 17,995 on the SRP but 18,795 on the VDP, and which one does the tool grab? Do they look at where these cars are listed at all the different prices and average it out? Find out what they're doing.
A $20,000 mindset versus a $2 million mindset
So that gets to my next point. I didn't mean to put 20 million in the title, I meant 2 million, but think about it. You could be a used car director of a dealer group and have 20 million in inventory. It's a different mindset from being a good used car manager who knows how to appraise a car, price a car, know what the reconditioning costs are going to be, paint depths, tire depths, all that, and manage a car. He's a great car guy. She's a great car girl. It's one thing to be a good car guy, in my case. It's another thing to manage a hundred $20,000 cars, and manage 2 million or 2.5 million, or as a used car director, 20 million. It's a different mindset and a different job description.
The inventory management tools of the world, the vAutos, VinCues, ACV MAX, DealersLink, all of them are great at helping you manage that 20 grand car, that 50 grand car. Where we step in at LotWalk is lot management. How do we manage the 2 million? Now that you own that car, now that you appraised it, however you bought it, it's in your inventory. What are you doing to manage that 2 million? Because this market's shifting. When you take a 1 or 2% drop in the market and multiply it by 100 cars on your lot, that's a big shift and a lot of money, and you've got to figure out the holes and where you have to capture it. Is it the trucks? Is it 2023s? Is it late models? High-mile late-model stuff? High-dollar stuff sitting? Isolate those cars. Figure out which ones are getting the leads, which ones aren't, which ones are getting leads but not being followed up with. All of that is a different mindset than being a good car person who knows how to appraise and price a car and which equipment matters.
One example, and I'm not calling my sister out. I can give my sister a $20,000 check and say, hey, put this in the bank, keep an eye on it, make sure I make a little money on it and don't lose it. Would I do that with her with a $2 million check? No. I'd probably need to go to Charles Schwab or an investment firm to handle my two-million-dollar investment, because that's a totally different mindset than handling $20,000. Keep that in mind as you work through this.
We're here to help. That's what we focus on. Inventory management tools are great at managing those cars and how to appraise and price them. We're going to help you manage that bigger investment and make sure you're turning it. And as a dealer group handling $20 million of inventory, a lot of stores can benefit from this: do I have a customer on this lot looking for a car that sold here, but I also have it over on that lot? Sorry for the video being long, but if you found it helpful, reach out at lotpop.com.
Transcript lightly edited for readability from the live stream. Watch the video above for Jasen's screen share.
