Tesla Going After More Used-Car Trade-Ins Amid Shrinking New Supply

With new cars in short supply, Tesla is apparently reaching out to owners to offer trade-in valuations, and has reopened a VIN-based trade-in estimator on its site.

byLewin DayJul 14, 2022 9:03 AM
Tesla Going After More Used-Car Trade-Ins Amid Shrinking New Supply
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With the ongoing supply chain issues, the car market is still a long way from being back to normal. Used-car demand has skyrocketed, with prices shooting up as well in response. Now, it appears Tesla is reaching out to current owners with some lightly applied pressure to trade in their vehicles, as well as reopening a VIN-based trade-in estimator on its site.

The company has allegedly started texting owners out of the blue, offering them a free valuation on their existing vehicle. In a post on the r/teslamotors subreddit, one owner received a text which stated that the company "want[s] to offer you free estimates for your current vehicle" whether or not they were considering a trade-in. The message went on to say that the owner could "be eligible for tax savings for trading in." Others in the thread expressed skepticism that the message was a scam, but the OP confirmed that the text was from an official delivery center. Another user further down in the thread chimed in to say that they also received word from Tesla about a trade-in, and upon checking their Tesla account, apparently saw that the company was offering them the same price for their Model X that they paid for a few years back.

The electric-only automaker has also reactivated a trade-in estimator on its website, as reported by Barron's. Like the Model X owner from the subreddit, other Tesla owners can enter their VIN and log in to their Tesla account to receive an estimated trade-in value for their car. Tesla has offered this tool before but took it down in November last year due to long delivery times on new cars.

Tesla production is so stretched right now that some used models are actually more expensive than buying new. Buyers are paying a premium to get a Tesla now, with wait times for new cars exceeding six months for most models. Thus, it's no surprise that Tesla is trying to secure a hold on used inventory. There's profit to be had, after all. Plus, it ensures the automaker has cars to offer to customers, whether new or used.

Traditionally, automakers don't get involved directly in used sales. Instead, that side of the business is handled by dealerships that are largely run independently in the United States. Tesla doesn't do dealerships, though, and would likely handle used cars via its own sales channels.

Other automakers are starting to look at diving into the used market as well. General Motors has recently launched the used car platform CarBravo. The aim is to capitalize on the broad inventory held by the GM dealer network in the UnS. The company even registered the catchy trademark "Feel the Usedphoria." Exciting, no?

The used market is a big deal, particularly in the post-pandemic world where new cars are still in short supply. Last year saw 40.9 million used cars sold in the U.S., 22 million of which were retail-based transactions. The biggest player in this space is CarMax, with the company seeing a gross profit of $2,339 per vehicle sold in its last quarter.

With that said, demand is starting to soften a little, with a dropoff projected for this year. It's led to layoffs at Carvana, with the used sales platform having over-expanded in the chaos of 2021's boom market.

For existing Tesla owners, trading in with the company will likely be an attractive option. It should serve as an easy way to upgrade to the latest and greatest models. For the automaker, it should help keep customers with the brand and reap a little profit along the way, especially while new cars are in short supply.

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