Macro Trends Expediting Need for Automatic's Used Car Platform

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Photo by Obi Onyeador on Unsplash 

Eric Burney, CEO of Automatic USA, is fond of saying the used car industry stopped evolving around 2001.

That’s why he and his colleagues launched the company’s software platform allowing potential dealerships to find all the data they need to secure vehicle financing for their customers in a matter of minutes — versus the usual several hours historically needed.

But, a number of more recent macro trends are making the rollout of the platform even more necessary, the company said.

The used car market has experienced unusual price increases, supply chain issues have squeezed the amount of inventory available — with companies like Ford F and Stellantis STLA talking about semiconductor issues that could last years — with consumers more open to exploring digital solutions to their car buying experiences. And, there is the matter of a global pandemic thrown into the mix.

COVID – Challenge Turns to Opportunity?

COVID-19 was initially, as it was for so many, a major obstacle to Automatic’s growth plans. Burney, who has 18 years of used car sector experience, stresses the need for strong relationships​​ in the industry. With the pandemic at its height last year, there were real challenges in getting agents to visit and establish such relationships with the dealers they needed as clients, he said.

COVID has also helped lead to supply issues which has helped push used car prices higher, so there is more upside for Automatic now. With restrictions also lifted in the states the company currently operates in, there is now a growing need to hire more agents to expand the dealership network.

To say car prices are higher is an understatement. Automatic even says used cars are actually in some cases increasing in value, describing the situation in August as “one of the most aggressive used car markets in history.” 

Then again, not all used car markets are created equally. Some states have seen average used car prices increase way more than others, maybe even creating a need for potential consumers to cross state lines to buy their new vehicle. The types of vehicles experiencing such big price hikes also vary with bigger SUVs, sports cars, and pickup trucks at the higher end of the range, making it more attractive to sellers to bring those types of vehicles to market. Buyers looking for a better deal might therefore consider smaller SUVs, hatchbacks, and minivans.

The pandemic is behind some of the price hike issues because it has had significant effects on the supply chain as well as on inflation. With the government reacting to the pandemic by printing money, inflation is also rising. And there is pent-up demand for cars generally after so many months of restrictions, both new and used.

“This increase in new car prices because of inflation, increased demand, and limited supply passes down to used cars,” the company said. “This presents a good opportunity in the industry for companies that can use these increasing prices to their advantage, like Automatic.”

Weather Plays Part, Too

Even the weather has played its part this summer. While a constant threat to inventory levels, the summer storm season is casting a bigger than average pall over the used car industry this year given the extreme nature of a generally low used car supply and the higher vehicle prices.

While in some cases used car prices were perhaps beginning to flatten out, overhanging weather threats could put a wrench in that.

“Just as used car pricing had begun to level out, the storm surges of late (and those expected to come) exacerbate market conditions,” the company said in late September. To make things easier for everyone, on September 27th, Automatic 2.0 launched - re-engaging all 940 dealerships on the platform. Everything from pre-qualification to funds being released just got that much quicker.

As of September 29, the WeFunder program set up to boost growth in Automatic USA’s platform had raised $1.3 million. 

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.