In what could be described as today’s “AI-urgent” environment, it can be daunting for dealers to know exactly how AI and related tools might help your business.
This article offers perspective on how AI and the predictive data it provides dealers are reshaping used vehicle inventory management decision-making today and into the future.
Types of AI
To start, let’s set the stage on the types of AI currently available to help dealers manage used vehicles today:
Predictive AI: This form of AI begins with the ongoing analysis and modeling of vast amounts of data on individual vehicles and shoppers to understand a) each vehicle’s ROI potential for a given dealer in a given market, b) the ROI-optimal acquisition/appraisal price to set the stage for maximum ROI, c) the retail price that will help deliver the anticipated ROI and d) the individual shoppers who, judging from their online behavior and interests, might be best suited to purchase the vehicle.
Generative AI: This form of AI “generates” content and helps dealers reduce the time it takes to complete different, almost rote-like tasks—from creating personalized follow-up e-mails to interested shoppers to vehicle descriptions and photo enhancements for online vehicle listings.
Agentic AI: This is probably the most nascent form of AI in used vehicles. It’s intended to automate specific tasks—producing performance reports or making payments—with little to no human intervention or oversight. The idea is that this type of AI acts as your agent with the goal of helping you gain operational or personal efficiencies you can apply elsewhere.
Is AI Required?
As I’ve talked to some dealers about AI and its potential, some ask, “Do we really need all this AI in the car business?”
My answer is always the same: It depends on you, what you want to achieve and how confident you are that your team can find even greater success in today’s more volatile and ROI-distressed market. The mention of an “ROI-distressed market” is intentional, because it often prompts a “what do you mean?” follow-up.
To answer, I’ll point to the average cost of wholesale inventory, which Manheim reports is close to $19,000. That’s up 35 percent from the 2019 average. Next, I’ll point to the average front-end gross dealers achieve today and back then. In Q2 of 2025, dealers averaged $1,567 in front-end gross, according to NCM Associates and Presidio. The tally benefited from scarce used vehicle supply amid strong pre-tariff demand. In 2019, dealers averaged $1,300 in front-end gross. The “ROI distress” arrives when you realize that despite an average 35 percent increase in the wholesale cost of inventory, dealers’ average return on investment, in the form of front-end gross, increased by 20 percent for Q2 of this year. Absent the lift credited to pre-tariff market dynamics, and the difference would be closer to 10 percent.
Benefits of Early Adoption
Some analysts expect reduced used vehicle supply and retail demand will continue to work favorably for dealers. Therefore, you could stay your current course, take a pass, at least for the moment, on adopting AI-driven tools, and come out OK.
Or, you could take a different view. You could lean into AI to drive greater used vehicle ROI through the improved decision-making and operational efficiencies these tools can help you achieve.
Those are the outcomes we’re seeing from dealers who have leaned into AI-enabled tools.
For example, we’re seeing dealer groups reverse a longstanding trend of wholesale losses with vehicles they move between stores because they failed to retail at the original store. AI-powered insights are helping dealers identify transfer opportunities earlier, even on Day 1, and shorten each vehicle’s overall time in inventory, which benefits front-end gross. Such AI-powered insights helped a nine-store group in the Midwest reduce the days to sell for transferred inventory from 34 days to 12 days, producing an average of $5,500 in front/back-end gross.
The Future of Automotive AI
With AI-enabled merchandising tools, dealers share that they’re seeing improvements in VDP views and leads, thanks to listings that offer a more compelling experience for shoppers and an internal process that gives managers and team members more time to engage buyers when they raise a hand.
There’s also an emerging AI-driven opportunity for vehicle appraisals, where the integration of systems that use AI to capture vehicle condition information and photos feed appraisals. This connection helps dealers move beyond default estimates for reconditioning, replacing them with automatic, cost-specific line items. Even better, when dealers have a more accurate and clear view of the reconditioning work and related cost a vehicle will require, they have the foundation for helping customers understand and trust how you arrived at your offer amount —a cornerstone for acquiring more vehicles that produce more favorable ROI outcomes.
Perhaps the most exciting aspect of the evolution in AI in used vehicles is that, as an industry, we’ve only just begun. In some ways, the used vehicle business has reached an inflection point—where AI-powered insights guide decision-making today the way the Internet, and the live market data it produced, transformed the business nearly 20 years ago.
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Derek Hansen is vice president, Inventory Solutions Management and Head of vAuto at Cox Automotive. By evangelizing vAuto’s new Variable Management strategy and driving integrations between dealer workflows and Cox Automotive’s offerings, he aims to deliver dealers more profitable, efficient, and seamless outcomes across their retail and wholesale portfolios. Hansen joined the Cox Automotive team in January 2015 holding strategic roles at both vAuto and Manheim. Hansen previously worked at Bain & Company, Deloitte Consulting, and Intel Corp and holds a Master of Business Administration from the Fuqua School of Business at Duke University.