In order to maximise the return of your used car department, you need to have a plan.
Besides your own franchise, what kind of stock would you carry in terms of age, brand and price range? What best suits your business model?
I have seen Many used car businesses suffering heavy losses by not having a profile and trying to play in a market where they have no expertise. It is really difficult to be an expert in every sector of the market and you need to know where your expertise lies.
Trying to sell high-end super vehicles on a mid-tier franchise floor seldom ends well. The same can be said for getting into the “cheapie” market – it is a different business and more often ends in tears unless it is properly planned and managed.
In my experience, being an expert in your own brand is the easiest way to generate the best returns. You know your product, your OE strategies and your clients know you for that brand, which means you have to do less promotion.
Linked to the aforementioned stock profile, you should have a sourcing plan. How are you going to source stock? What trade-ins can you expect? How many vehicles do you have to purchase every month to stock your business and how are you going to do this? Your service customer base is an excellent place to start as your clients are at your dealership and their vehicles are in the shop, which is perfect for a thorough valuation.
How much stock do you want to carry and what funding are you going to need?
What kind of return are you expecting in respect of profitability and return on investment? You need to consider what the true potential is of the used car department in terms of display size, the area and how may customers visit your dealership on a daily basis.
Look at a sales pricing process. I would always price a vehicle slightly above the price I thought was the correct price and then monitor the activity on the vehicle in the first week of it being advertised. If there’s been no activity, I would start marking it down until activity picked up.
Setting your price is a critical step for every used vehicle business, so you should give it the required attention and time. I would say that if you are serious about your used car business, you should review activity and re-price once a week.
Lastly, know what advertising is costing you and what gross profit every advertising platform generates. We were able to do this, and it saved us a fortune and also generated loads of helpful information, which facilitated better used car management.
Selling used vehicles is a massive topic, and here are just some of the points you need to consider. Let me know if you have any questions - donaldc@zizap.co.za or 082-776-1887.
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I always do like seeing other people dance in their cars. It's one of the things that makes me happy.
Ariel Gore
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