All the glamour of automotive is in new car sales: you’ve got the shiny vehicles, the enticing finance offers from the OEMs, and all the extra bells and whistles like free services to throw in.

                                                      

Could used cars be the holy grail for profitable retailers?

5th April 2018

Malcolm Miller

All the glamour of automotive is in new car sales: you’ve got the shiny vehicles, the enticing finance offers from the OEMs, and all the extra bells and whistles like free services to throw in.

By contrast, the used car market has the reputation of being a bit of a poor relation. A must-have department, where customers’ part exchanges are dealt with almost on the QT. 

But with potentially minimal adjustments, any auto business’s used car sales team could be at the helm of the most profitable division in their company.

According to the latest figures from the Society of Motor Manufacturers and Traders, more than 8.1million used cars changed hands in the last quarter of 2017. This may have represented a 1.1% dip but it was still the second highest total on record. Furthermore, the average age of a vehicle on the road has increased, from 6.8 years in 2003 to 7.8 recorded in 2015. There is an appetite for used cars among the buying public, so this important market should be nurtured not ignored.

At learning and development agency RTS Group, we work with used car retailers which are making little or no profit from the pre-owned market and helps to turn them into highly profitable enterprises.

According to account director Carl Gregory, the starting point is looking at a business’s used car operation as a whole; potentially, minimal adjustments could make a big difference.

“All too often, the new car sales people are given the job of selling the used cars too, but a totally different set of skills are needed,” he said. “We look at the whole used car operation – what processes are involved, what people are involved and what skills they have – and draw up a bespoke plan for each dealer so they can really turn it around.

“In some cases, staff training may be needed, but this isn’t always necessarily the case. It’s easy to throw training money at the issue with little result. By looking at the used car operation in its entirety we can get to the bottom of what needs changing to bring about the necessary improvements.”

Mark Kirkpatrick, senior learning and development consultant with RTS, added: “The biggest profits are to be had in the used car business, if it is run properly. There’s no room for sentiment. The car is a commodity and you have to buy in what you know you can sell, and sell quickly, and not what you, personally, like.”

Six ways to improve your used car sales

  1. Stock the right cars. Look over the used market data for what sells in your area and examine your own data, to see what has sold well and sold quickly. It may sound obvious, but if your operation is based in an area where cars drivers predominantly own 4X4s and premium marques, you’re unlikely to get much interest in a fleet of used small family cars. If you end up with any cars like this through part exchange, by all means give them a try but if they don’t sell within a set timeframe, send them on for auction.
  2. Stock the right level of cars. Most dealers have too many – it’s rare they have too few. The holy grail is to change your stock over at least 12 times per year. Every car you have sitting out on the lot is costing you in terms of depreciation, rectification and interest. If you want to stock more, then you have to sell more.
  3. Move stock quickly – speed is everything. A used car costs in the region of £11.50 per day to have sitting on the used vehicle display, and that factor has to be taken into account.
  4. The most important KPI is your Return On Investment. Don’t get hung up on profit per unit. Instead look at how much profit you made per day it was in stock. Return on investment factors in how quickly you sold that car.
  5. Preparation is everything. Always ensure cars are fully prepared before you try to sell them. Customers are far more likely to buy a used car that is as good as it can be than one that still has jobs that need doing, such as sorting out minor and major faults before sale. Your sales team will have a far easier job if they are selling something as perfect as it can be. It’s not enough for it to have simply undergone a safety check.
  6. Don’t keep stock for too long. If it’s not sold within 60 days, then pass it on for auction, and use the proceeds to buy something that will generate profit. This goes back to your ROI – there’s nothing to be gained by keeping a car for months, finally selling it only to find that any profit has been wiped out by the cost of keeping the car for too long.

The team at RTS Group devise, design and deliver a wide range of learning solutions which improve the knowledge, skills and performance of frontline staff at automotive dealerships. To get in touch call 01249 445622 or send us an email.

Carl Gregory

Carl joined RTS Group in 2013 as Head of Mazda Academy, and is now Account Director, managing the relationship with our clients to ensure they have a great customer experience. He works in partnership with clients and colleagues to maximise our clients’ return on expectation and return on investment, so adding tangible commercial value to their businesses. Carl describes himself as “passionate”, so he is perfectly suited to his role.

Before joining us, Carl had a long and successful career in the automotive sector, including several academy headships and managing a dealership in Germany. He was also European Training Manager for Volvo Trucks in Sweden.

Carl has two sons, and in his spare time his passion extends to football – he commentates on England football matches for the online Champions Soccer Radio Network which broadcasts in the US.

Mark Kirkpatrick

Mark is senior learning and development consultant with RTS Group, designing and delivering programmes for many of our clients, to suit the training needs of their dealerships’ customer-facing staff. Working mainly with management, Mark is also a business consultant for Mazda dealerships.

Mark’s career began in music as a bass guitarist, but he joined the automotive industry through his father’s dealership, progressing his career to dealer principal for a number of different franchises. In 1996, he moved into training with Ford, and for six years was head of learning at the Henry Ford College, at Loughborough University. He joined us in 2009, left for a time to become a freelance consultant, but loved us so much he came back in 2014.

Married with two children and one grandchild, Mark still loves his music and in his spare time plays with bands and in studios.

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