Car dealers primarily source their vehicles from three main channels: direct purchases from manufacturers, wholesale auctions, and customer trade-ins. According to the National Automobile Dealers Association (NADA), approximately 40-50% of a dealer's used car inventory comes from auctions, 30-40% from trade-ins, and the remainder from other dealers or direct manufacturer programs for new cars. This multi-channel approach ensures a diverse inventory to meet customer demand.
When buying new cars, dealers work directly with manufacturers like Ford, Toyota, or GM through franchise agreements. They place orders based on market trends and sales forecasts. For used cars, auctions are a key source. Major auction houses like Manheim and ADESA handle millions of vehicles annually, offering dealers a wide selection. Trade-ins are another vital source; when customers upgrade, dealers appraise and acquire their old cars, which are then reconditioned for resale.
Dealers also participate in dealer-to-dealer networks, where they swap inventory to balance stock. For example, if one dealer has excess SUVs, they might trade with another for more sedans. This helps optimize inventory without additional costs.
| Source Type | Percentage of Inventory | Average Cost per Vehicle | Key Examples |
|---|
| Manufacturer Direct | 50-60% (new cars) | $25,000-$40,000 | Ford, Toyota, Honda |
| Wholesale Auctions | 40-50% (used cars) | $15,000-$25,000 | Manheim, ADESA |
| Customer Trade-ins | 30-40% (used cars) | $10,000-$20,000 | Local dealership appraisals |
| Dealer Trades | 10-20% | Varies by model | Regional dealer networks |
| Online Marketplaces | 5-10% | $12,000-$30,000 | eBay Motors, Cars.com |
This diversified sourcing strategy allows dealers to manage risk and cater to different buyer segments. It's essential for maintaining a fresh inventory and competitive pricing.
