Fewer 4th Quarter New-Car Buyers Left

Call in Calvary; Used Vehicle Department Might be Able to Save the Day

They’re running out of fuel and are almost over. Before ending, though, they’re using up a whole lot of your future buyers by luring them in with pricing that severely cuts into your margins. Now that the manufacturers’ employee programs are all but through, what are you to do for the fourth quarter of 2005, and perhaps beyond?

Throw on top of the situation the probability that interest rates will continue to rise, unless the hurricane recoveries cause the Federal Reserve to reverse course on its rate hike quest, and the immediate outlook for new car sales is not a pretty picture. What’s a dealer to do? Fixed operations in used car departments may have to carry you. You need to figure out how you can retain gross profits on used vehicle sales.

It’s a commonly held false assumption that you need to be either volume- or gross-minded. The most successful dealers are both. Now would be a good time to train your sales management that the two can and should co-exist.

The ability to have your cake and eat it, too, if you will, comes down to processes and systems. If you have a good sales process in place you will be able to retain the gross.

Also, in order to become more successful when it comes to used car sales, realize you will have a good mix of nothing deals and good deals. You have to, if you are going to be able to keep your inventory moving.

Add to the above new approaches for selling used vehicles the fact that consumers do not always buy on price and price alone. Used vehicle buyers are looking for value, too. Yes, in the absence of value, price certainly matters. But you have to have high quality of service, good operations, good quality vehicles and good presentation of the product – all value-related components – to be able to retain gross.

Certainly, too high of a gross ($1,000 over benchmark, for instance) will run customers away over time. But, high grosses are not unethical if you are delivering value. You are entitled to a fair profit and your sales people are entitled to a fair commission.

Tips, Facts for Making Improvements

Here are some tips and facts for improving the performance of your used vehicle department.

• Have a process in place to identify the trigger or hot button (price, trade in value, monthly payment or the down payment). Then work the deal. At some point, you have to make a call whether to take the deal or let the customer walk. But work to save the deal. Monitor customers who walked yesterday to see if they bought a car somewhere else. If they didn’t, you still have a chance to make the sale.
  
• Know what sells in your geographical area. Even if you are a domestic new vehicle dealer, if your market area is hot for foreign-manufacturer used vehicles, you need to have them.
  
• Keep your lot fresh. Do you have a 45-day or 60-day turn policy? Successful dealers are firm on sticking to their policy.
  
• To monitor on your own what vehicles you are selling set up a tracking system through accounting. Set up accounts for trucks, SUVs, pickups and off-brand vehicles. Daily operating control can track, too. Know what the hot colors are, consider rotating vehicles and keep a log of requested vehicles.
  
• NADA statistics show 62 percent of used vehicles sold by dealers are trade-ins, 32 percent are from auctions, and 6 percent are from street purchases.
  
• If you recondition a vehicle, get it on the lot no longer than four days. Monitor reconditioning costs and set spending limits.
  
• Have a firm policy on we-owes. There are problems in this area all the time. For instance, sometimes we-owes don’t get in the deal. Establish a policy that we-owes are always listed in the deal, even if there are not any we-owes owed. Establish a system where you charge back to the sales person if we-owes are not included.