Experts offer strategies that range from reducing inventory-acquisition costs to reconditioning more expeditiously.
Dealerships with strong used-car operations share two things in common. They’ve reduced the cost of acquiring inventory cars and recondition them faster.
“Margin compression in used-car operations means dealers must disrupt old practices that result in high vehicle-acquisition costs and slow time-to-market speed,” says pre-owned vehicle expert Ed French of AutoProfit. “There’s no other way to really succeed in used cars these days.”
A way to cut acquisition costs, pare back on reconditioning and improve inventory quality is to rely on internal sources. That includes programs that encourage service-department customers to sell or trade in their vehicles.
“Those opportunities should account for 60% of inventory, with private party and auction units making up 40%,” says French, a former Buick dealer and a board member of TruWorth Auto, a used-car superstore in Indianapolis.
Here are four other ways to make the used-car department hum:
No.1: Shorten Trade Cycle
Brian Skutta, former CEO for data-mining company AutoAlert and now with TrueCar, says today’s 68-month average ownership cycle keeps buyers out of the market too long. His goal is to help dealers reduce the cycle down to 36 months.
An AutoAlert-commissioned survey of more than 400 vehicle owners indicates consumers would like to trade more often.
“The survey found that dealers aren’t sharing disruptive trade practices with customers, so they’re not being made aware of opportunities to trade sooner, yet keep payments about the same,” Skutta says.
Nearly half of survey respondents were not aware they could upgrade their current vehicle before their loan or lease is at the end of term. Nearly 65% say they would like to upgrade their vehicles every three years or less.
No.2: Reduce Reconditioning Bottlenecks
Dennis McGinn, founder and CEO of Rapid Recon, says disruptive recon practices get units retail-ready in four days or less.
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