Used Cars – The Forgotten Franchise

There’s never been a more crucial time for Dealer’s to beef-up their used car operations, yet the department remains undervalued in many dealerships.

Most Dealers should be well aware of the challenges their new car department faces when it comes to profitability. Everything from Australia’s over-saturated market, to the prevalence of online and mobile technology has helped to empower consumers with stronger negotiating skills, in-turn pushing prices down. On micro and small cars in particular, many Dealers are lucky to make any profit at all on the price of the cars they sell, and so this has placed an increasing emphasis on the need to find other profit centres in the business.

The service and aftermarket department is one obvious place, as is finance and insurance, but what about used cars?
Unlike in the new car department, pre-owned sales still have an excellent profit potential for Dealers with the right strategy. Yet, the used-car department is the last place many Dealers look when it comes to increasing revenue.

So let’s recap and take a look at some of the essentials for building used car success:

Know Your Inventory

With plenty of technology available to help track inventory, there’s now no excuse for being unaware of what’s in your lot, and how long it’s been there. New tools to give Dealers thorough insight into their inventory is emerging all the time and best of all, it’s helping Dealers make quicker decisions about what cars to bring onto the lot and how to price them.

Train Your Staff

Want your used car team to excel? Then invest in them.

Though the automotive industry is slowly shirking its reputation (particularly in the used car department) for employing ‘slick operators’, many people still approach the pre-owned department with particular caution. Equipping your staff with the right skills, techniques and training to not only sell cars, but deliver exceptional customer service will go a long way to help them earn customer’s trust and close more sales.

Set Effective KPIs

Walking the line between motivating used car staff to increase sales volumes, whilst at the same time containing employee costs can seem difficult, but it is worth getting right.  Achieving the right balance between the base wage, or retainer, and the commission component of your team’s salary is one area to focus on first.

The retainer wage should suitably cover ‘ground work’ like completing paper work, and introductions, whilst commission is the reward for the number of used cars sold and at what gross profit.

According to Randall Bryson, Partner at BDO Automotive, ‘It is [also] essential that the commission component has the right balance in rewarding both sales volume and gross profitability, and also incorporates the strategic goals for the dealership. For example, it would be easy to incentivise service advisers to increase sales and gross profit, yet this may promote behaviour that erodes customer satisfaction and retention.’

The same applies to your used car department. It’s simply not enough to consider sales volume alone when setting KPIs, especially if this puts customer service and customer retention at risk.

Treat Used Cars Like New Ones

They may have a few more kilometers on the clock, but it’s important to remember that used cars are as good as ‘new’ to their next owners. With this in mind, all used cars that reach your lot should be washed, detailed and/or repaired before they’re advertised, not to mention kept impeccably clean for as long as they stay on your lot.

When being advertised or demonstrated, your used car team should be just as conscientious, making sure that your used inventory is handled as carefully as the cars in the showroom.

Make Sure Your Marketing Matches

No matter how clever and effective the messages you send on radio, TV and online are about your latest used-car sale, if your dealership looks lacklustre, your sales won’t shine half as much as you hope.

Customers who drive into your dealership off the back of your used car advertising aren’t expecting to see your dealership looking like it’s another ‘Monday afternoon’. In fact, they may even begin to doubt the legitimacy of your sale.

Balloons, posters, flashing signs and blow-up mascots may seem like you’re converting the business into a circus, but they all combine to send an important message.

‘Something’s going on at this dealership and today is a good day to seal the deal.’

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