Used-Car Dealers Face Historic Inventory Crunch. AI-Powered Tools Offer a Path Forward
Used-vehicle inventory remains at historic lows, forcing dealers to rethink how they source cars and connect their sales and service operations. The problem isn't demand-it's supply imbalance, according to Derek Hansen, senior vice president of Dealer, Lender & Inventory Solutions at Cox Automotive.
New car affordability has deteriorated. Automakers have favored higher-end models while buyers increasingly search for affordable vehicles. Rising oil prices and geopolitical tension have made the problem worse. The result: buyers who would have purchased new are trading down to late-model used cars instead.
"We're seeing more and more buyers that are having to trade off and trade down to late-model used that in recent times would have been new car buyers," Hansen said.
The Service Department Is an Untapped Inventory Source
Dealers who want to serve the full spectrum of buyers need to look inside their own operations first. The service department holds data that most dealerships ignore when sourcing used cars.
When a customer declines a repair order, that information directly affects what the vehicle is worth on the used market. Deferred maintenance consumes gross profit potential during retail. Yet most dealerships don't feed this data into the appraisal process.
"You know the declined ROs, the ones that they haven't done that are real service items that are real gross, that will consume the gross potential on that vehicle as you think about retailing that vehicle as a used car," Hansen said.
Cox Automotive has built infrastructure to connect service and sales departments automatically, making this data flow standard rather than manual.
AI Reshapes Appraisals and Consumer Search
Cox Automotive Navigator integrates Xtime, Vauto, and dealership CRM and VIN tools. The platform enables data to flow between departments without manual handoffs, allowing teams to source and retail used cars simultaneously.
The system uses AI to examine a vehicle's complete history at appraisal. Large language models add make and model-specific context and flag deferred maintenance issues that affect value. The platform also tracks individual appraiser performance across the dealership.
On the consumer side, AI is changing how buyers find vehicles. More shoppers use AI-driven search to locate cars, which means dealers must ensure their inventory appears where those searches happen.
"More and more, they're shopping via AI. So making sure you're using AI so that your vehicles are appropriately merchandised, that they're getting in this generative engine optimization, that they're showing up where consumers are shopping," Hansen said.
Treating generative engine optimization as part of merchandising strategy is no longer optional-it's where inventory visibility happens.
Data and Connectivity Drive Growth
Market pressures aren't easing. Inventory will remain tight and affordability will remain strained. But dealers who connect their operations and put better data to work can grow through these conditions.
For sales professionals, the shift is clear: the dealers winning are those who treat service data as a sourcing asset and use AI insights to make faster, better-informed decisions about which cars to buy and how to retail them.
Learn more about AI for Sales and how AI Data Analysis can improve your team's performance.
Your membership also unlocks:
