Maximising Used Car Profits
Today’s used car industry is no longer a mere benchwarmer for its new vehicle counterpart. In fact, if dealers can establish and focus on strategic objectives for their used vehicle operations, they can establish a significant channel for optimising dealership sales and profits:
1. Aligning Stock to Market Demand: Cutting-edge tools enable dealers to assess their local market’s supply and demand data, thereby basing inventory decisions on vehicles that accurately reflect their direct market’s demand. Much of this data can be retrieved and analysed from their dealership management systems (DMS), allowing dealers to seamlessly identify fast-moving stock, thereby increasing profits.
2. Pricing Strategy:
– Analyse: Dealers need to engage in the daily analysis of used vehicle prices and implement changes relative to market fluctuations. With accurate pricing, dealerships will sell vehicles more quickly, thereby boosting stock turnover and ultimately leading to increased sales.
– Affordability: Dealers should offer customers affordable prices for used cars that exemplify value for money.
3. Cutting Transportation Costs: Dealers can benefit from transporting used vehicles between various dealerships via vacant slots on other transporters, such as on a return load, thereby reducing costs.
– Transparency: Sales managers often reduce vehicle prices merely to close a deal, thereby handing a portion of the profits over to the customer. To encourage a transparent sales process, it’s imperative that all sales staff are on the same page with regards to your pricing strategy.
– Simplification: Dealers can simplify the sales process by cutting out the administration of collecting a customer’s personal details etc. before a test drive of a used car. Studies have shown that as soon as a prospect gets behind the wheel for a test drive, the chances that they will convert increase significantly.
– Incentivise the Sales Team: Most sales representatives demonstrate fear of losing a sale of a new vehicle over a used one. Dealers need to strengthen the commitment to used vehicle sales within their dealerships by educating their staff on the important role used car sales play in contributing towards the company’s bottom line, and rewarding employees for generating these sales.
5. The Upsell: Used car dealers should be offering their customers relevant auxiliary products and services, such as extended warranties, maintenance and service plans, paint protection, bluetooth kits and other unexploited accessories.
6. Financing: Purchasing a vehicle is typically one of your customer’s greatest expenditures in their lifetime, thereby causing a lot of anxiety about parting with huge sums of money. To put their minds at rest when making such a significant purchasing decision:
– Promote the statistics of financial approvals realised at a specific dealership, or by posting the pros and cons of financing options available to customers
– Provide online finance calculators so consumers can transparently and conveniently calculate, compare and analyse their financial options wherever they may be. This translates into greater trust and higher likelihood of a purchase, consequently boosting sales.
7. Focused Marketing Strategies: Marketing strategies should be tailored to the individual customer rather than a broader audience, thereby establishing a more personal relationship with them and adhering to their unique needs.
8. Collaboration: Creating relationships with other dealers and independent businesses as opposed to viewing them as competition can increase sales and aftersales prospects. By simultaneously selling used cars to the consumer and trade (online auction platforms, for instance), more cars are sold resulting in higher stock turnover and increased profitability.
9. Vehicle Reconditioning Costs: Reconditioning costs directly affect a dealership’s bottom line and dealers should assess how to alleviate these additional costs. For example:
– discount retail rates for labour in service
– discount retail rates for reconditioning of parts
– use parts that are non-OEM or warrantied
– use centralised operations
10. Create and Renew Inventory: Maximise profits with used cars by holding sufficient and renewed stock to meet customer demand by:
– proposing a fair trade-in price for new car buyers’ old vehicles
– auctioning unsold vehicles after 60 days, thereby reducing inventory costs and refreshing stock
– dealers with numerous showrooms can swap inventory with each other, thereby refreshing stock and maintaining prospects’ interests
11. Gain Customers’ Confidence in Used Cars: Dealers can give consumers peace of mind by offering them extended warranties and thorough vehicle checks, making used car buyers feel as if they’ve received the same quality support as a new vehicle buyer would.
12. Market Used Vehicles: Notifying present and prospective customers of available used cars that meet their individual preferences can support sales by physically bringing them to the dealership and potentially making an offer. A promotional used car event can also drive traffic to the respective dealership.
13. Prepare for the Outcomes of PCP: Personal Contract Purchase car deals have risen in popularity and in so doing, have simultaneously shortened the ownership cycles of new vehicles. This has had a significant impact on the used car industry as more of the same vehicles are being returned at similar times in favour of newer models. With this said, dealers must strategise how to absorb these cars when returned to prevent a surplus of stock.