WASHINGTON — Artificial intelligence is taking a larger role in how auto dealers price used vehicles, offering the potential to protect margins and reduce employees’ workloads even as consumer advocates raise concerns about how far automated pricing should go, according to a new report.
With used-vehicle prices elevated and affordability strained, dealerships are increasingly looking to technology to monitor market conditions and adjust vehicle prices rather than relying on managers to periodically review inventory, EUPerspectives reported.
‘Looking for Efficiencies’
“Everybody’s looking for efficiencies,” Patrick Janes, assistant vice president of vAuto Inventory Solutions at Cox Automotive, said during an Automotive News webinar cited by EUPerspectives. “AI is promising this ability to just do more with less.”
Janes said the average used vehicle is now listed for more than $27,000, making effective pricing increasingly important to both dealers and consumers.
Dealers traditionally may leave a vehicle at its original price for too long before making a substantial reduction after demand has cooled. Automated systems can instead monitor demand and market conditions and make smaller adjustments along the way.
From Pricing Rules to AI
Cox Automotive envisions dealers adopting automated pricing gradually, according to EUPerspectives.
At one level, dealers establish rules governing when a vehicle’s price should first change, how much it should be reduced and how frequently additional adjustments should occur. Software then implements those changes within parameters established by the dealer.
More advanced systems could recommend the initial price and then continually adjust it based on market data until the vehicle is sold.
Janes said dealers still want control over or approval of a vehicle’s initial price and the ability to intervene as market conditions change.
Responses to Changing Demand
Automated systems also can respond to changing demand. A scheduled price reduction, for example, could be halted if a vehicle suddenly begins generating more customer inquiries or market conditions indicate that a reduction is no longer necessary.
Beyond pricing, dealers see AI as a way to free managers from repetitive tasks so they can devote more time to merchandising, vehicle preparation, reconditioning and sales.
“That is the payoff for AI, right?” Janes said. “To take care of some redundant tasks, do it effectively, so your folks can wear more hats and get more things done.”
Dealers Urged to Examine Current Practices
Janes said dealers considering automated pricing should first understand how effectively they manage prices today.
Among the factors they should examine are how many vehicles go a week without a price change, the size and frequency of discounts, how often prices are increased and how much dealerships typically discount vehicles during final negotiations.
Dealers also should determine how much employee time could be saved through automation, he said.
The shift requires dealers to trust algorithms with a function that directly affects profitability. But Janes said that does not necessarily mean turning pricing decisions entirely over to AI.
Instead, the emerging model combines dealer-established parameters and human oversight with software capable of monitoring the market continuously and responding more quickly than periodic manual reviews, EUPerspectives reported.
