Making a profit in the used car business is increasingly more challenging. With consumers becoming smarter and having access to more information, plus more options, it seems the only way for dealers to remain competitive and profitable is to change their mindset.
The goal of the average dealer is to make money not only on each car sale, but also on the vehicle trade itself. The problem is, if he can’t retail the traded vehicle on his own lot then he sees it as a loss because he has to wholesale it.
This is old-school thinking that causes the “average” dealer to look at profit at the per-vehicle level. By adapting a new mindset, average dealers can become GREAT dealers!
Every vehicle you acquire is going to be moved, be it through wholesale or retail. The question is, how quickly and through which channel. Used car managers understand that the faster you turn your inventory, the more profit there is to be made. When you design your profit strategy around this fact, you stop looking at profit on a per-vehicle basis, and instead realize the bigger picture.
Profit Begins with Acquisition, Not Liquidation
Finding the vehicles you want and achieving a faster turn with a higher gross begins with acquisition, not liquidation. The more quickly you find the vehicles you know you can sell retail, and of course the less you pay for them is the first step towards greater profit. I think it goes without saying that dealer auctions don’t help achieve your profitable acquisition goals.
When you’re trying to keep your pre-owned lot stocked with high-quality, in-demand vehicles, dealing with auctions can be a costly and time-consuming process. For one, you have to wade through a range of vehicles that don’t meet your needs before finding the right model, in the right year, with the right options. You also risk having your price bid up by competing dealers.
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