In today’s economic environment, to be a successful car dealer, you must be willing to adapt to the changing environment. For example, historically, the second-hand car sector accounts for about 25% of dealers’ total operating profit on average. But you may want to go beyond that to increase profits.
Many buyers prefer to buy used cars from new car franchisees rather than from independent dealers.
Unfortunately, the used car sector is sometimes misunderstood or mismanaged by dealers. The success of this department is basically due to better inventory control. In order to improve the possibility of profitability, we can consider the following 10 practical steps: automobile manufacturers continue to squeeze dealers by reducing the gross profit of new cars. At the same time, many people are now focused on paying the absolute lowest price they can afford, which means that many traditional new car buyers choose second-hand cars the next time they buy them. Therefore, in today’s economic environment, managing a more efficient used car sector may be the key to survival.
Make sure the right person is in charge. Your used car trading manager sets the tone for the Department. He or she must have the necessary knowledge and skills and recruit competent staff to handle sales.
Know the market like the palm of your hand. Analyze the sales trend of dealers and compare the results with the vehicles in stock. Consider the brand and model sold, as well as the price range of the vehicle purchased, to determine which type of inventory is most suitable for your specific market.
Once you understand the market, make sure you want to buy a car rather than trade it in. Otherwise, will you get inventory from factory sponsored auctions or other channels?
Evaluate all used car trading in the auction house, whether they are purchased or traded. Use standardized checklists to ensure that all assessments are consistent and accurate. Don’t adjust your valuation just to buy a new car.
Repair vehicles intended for retail use. The aim is to improve the appearance and operation of the vehicle to attract customers and move the vehicle quickly. This can not only improve the gross profit of used cars, but also improve the image of dealers. On the contrary, if you don’t pay attention to it, it can lead to headaches.
Once used cars are ready for sale, continue to monitor their condition. For example, you can have each salesperson responsible for a different department every day and report any deficiencies to you. This can facilitate regular checking of your inventory and familiarize the salesperson with their own inventory.
Check every 30 days. As a guideline, successful dealers can generally sell used cars within 30 days. If you keep your vehicle in stock for too long, you risk losing revenue, not to mention the extra cost of handling the stock. The longest “shelf life” should be 90 days.
Don’t ignore low-cost cars. The risk of loss in a used car trading is its cash value. The average gross margin reflects the profit you are trying to make when you sell any used car. When you calculate your average unit cost and sales profit, you may be surprised at the profitability of the low-end market.
Adjust the price of inventory. A common practice is to reassess older vehicles in inventory, reducing the cost by $100 for each additional second-hand vehicle until the vehicle is sold. This may allow your dealer to sell old vehicles so that the money can be invested in other stocks. There is usually no need for additional incentives to move these vehicles.
Reward your best salesmen. Don’t let all the glory go to the new car sales department. One way is to make a compensation plan based on the total amount of the new and used car trading department. Consider other incentives for the success of the used car sector.
As you know, it’s more difficult to sell second-hand cars, and sales people usually need more knowledge and talent to complete the transaction.