As a business owner making the decision to enter the used car market place more aggressively and to then make the investments in your business and in the people required, in order to ensure success, this can seem to be a daunting process. It is an entirely different process from that required to plan for continued success in the new car market, it is going to require a continual and structured evolution as you grow, but for those prepared to dedicate the time and the energy in this area of their business, the rewards are startling.
Currently the size of the annualised used car market place is over three times the size of the new car market and what’s more, you are free to take as large a slice of this market as you want. There are no restrictions within this market on the volume of stock you can purchase and then retail, no prescribed model mix equations and no limit on profit margins; it really is the business with no restrictions and unlimited profit potential.
Now by default all franchised dealers will already have the foundations of a used car business in place; they will sell ex-demonstrator cars, ex-service loan cars and part exchanges, but is this taking advantage of the opportunity that the used car market presents?
If we use a rudimentary argument at inception, the immediate size of the used car market to your business should be just over 3 times the size of your new car business; if this is the national picture, then why should your town or city be any different? To put that into sharp focus, if you are selling 500 new cars a year, then statistics show that the immediate used car opportunity is 1,500 units per annum.
So how do you get there and then continue to grow thereafter? Remember the age of the internet and advances in technology have transformed the purchasing behaviour of customers and the size of your used car market is no longer linked to the size of your local conurbation.
Well this journey will take a continual focus and investment in the correct resources at the right time in your growth journey. It will require a continual focus on all the areas required to succeed in the used car market place and this will evolve year on year; the infrastructure required to get you to 500 used car sales per annum, will bear no resemblance to that required to get you to 1,000 and more after that. But at the foundations of this growth will be an operational structure that will need to be built and then continually evolved and
this process will involve many challenges, but will include;
- The building of the used car stock acquisition programme required to succeed; if you want to sell 1,000 used cars per annum, you will probably need to purchase at least 1,200.
- The eventual splitting of your sales team and the building of the independent used car sales department required to achieve the volume objections.
- The implementation of the operational procedures required to ensure that your used car business can succeed.
- Enhancements in stock turn to reduce funding and the costs associated with the used car operation.
- The implementation of the management and sales enquiry procedures required to operate at the volumes desired.
- The building of your used car senior management team; finding the right people.
- Effective individual targeting and budgeting for the used car operation, that allow for the cyclical demands of the market place and that stand-alone from the new car requirements of the overall business.
- An understanding of the importance of, (and the ability to offer), the suite of financial purchasing arrangements required to be successful in the used car market place.
- Constructing the marketing and advertising campaigns, as well as the strategies associated with success in the used car market place.
If you are the owner of your own business or a member of a senior management team, this process may seem daunting but luckily help is at hand.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers.
We have been on
this journey ourselves, understand the challenges involved because we have
faced and overcome them in our careers, so know exactly what will be required
and when, in terms of operational procedures, funding and personnel.
If this post has
resonated with you and you would like to know more about our used car business
development programmes then please do not hesitate to contact either Andrew
Banning or Malcolm Thomas at ajb@autoformance.com
or mgt@autoformance.com
Alternatively
please do not hesitate to call us on 0345 057 3177, when it will be our
pleasure to help.
For more
information about our services please visit our website at www.autoformance.com
Andrew Banning.
Director.
I’m asked this question a lot during discussions with clients and my stock answer is “Yes!,,,, Of course cyclical demand exists;” and I add the caveat that we ignore it at our peril!
As the used car market continues to grow, up 7% during 2016 and now totalling over 8 million sales, the importance of success in the used car market, to the overall long term success of your business, is becoming more and more important, and some sectors of the automotive market are now at risk.
We have enjoyed some “Heady Days” in the new car market in the recent past, no doubt helped by pent up new car demand, cheap interest rates, increased choice of competitive financing arrangements and more flexible ownership models, and the franchised dealer network has enjoyed this period.
But many have achieved the targets set of them by the manufacturer, enjoyed these good times and taken their eyes off the part of the business that is at the heart of their long term growth and survival.
Yes new car times have been fabulous but remember, this is the part of your business that is, in many ways, controlled by forces outside of your control.
This is not to say that the new car business is not important, good relationships with the manufacturer must be worked on and protected at all times as without it, you have no brand identity. It’s just that a lot of dealers have taken this business, it has made them profitable and they have not given enough thought to protecting and growing their used car business.
Sure their used car business has grown, but in how many cases has this been in spite of what they have been doing and market led? I don’t know, and every business will be different, but too few are planning operationally for how they achieve year on year growth in this very important market sector.
This of course is a huge task and one that constantly evolves; in future blog posts I will cover some of the subjects key to building your used car operation, and these are both varied and numerous. If your business is going to make the leap from being a disposal centre for part exchanges, to having a used car operation with the foundations required to ensure it is going to grow year on year, many operational challenges are going to have to be faced and overcome, everything from;
-
Effective used car stock acquisition, which will be at the core of your ability to succeed.
- Profiling and funding arrangements.
- New car professionals and used car professionals; are they different beasts?
- Utilising funding agreements for growth in the used car market.
- Building your successful used car team.
- Understanding the used car sales process; “The Importance of Now!”
- Enhancing stock turn and the financial benefits.
- Digital marketing, e-campaigns and social media; the role they play in the used car market.
But at the core of all this will be cyclical demand and the importance it plays in operational planning, budgeting and in targeting. We accept that it exists in the new car market; it is predominantly driven around the two yearly changes in registration plate, so we accept that February and August may be quieter than March and September, but what effect does this have on the used car market?
Just because the new car market is quieter at certain times of the year, is this true of the used car market? It may be quieter for you, because you have no proactive and independent used car stock acquisition process in place and therefore there are less part exchanges in stock, due in part to the new cars not yet being delivered and the associated part exchanges not being in stock and available for sale?
So have you convinced yourself that February and August are quiet used car retailing months, because they have always been quiet for you? Well, I would advise that you try this for some free market intelligence.
In the last 10 years we have seen the rise of the independent used car retailer/super market and you will be lucky if you don’t have a flourishing and professionally run independent used car business in your city/town.
We have been tempted to look down our noses at these operations but I caution this; go and speak to your local estate agent if you want to be in no doubt as to the challenges you face. They will warn you that they laughed at the idea of internet based agents like Purple Bricks, in fact they refused to believe that outside forces could target their market and revolutionise the way business was done. Well with declining sales and mass business closures in the sector, no one is laughing now!
This is a big subject and one of your major challenges, which I will be discussing in future blogs but for now, make a habit of driving past your local independent specialist at least once a week. Look at their levels of stock and how busy they are during February and August. Have a look to see if they have run down their stock holding, whether they are quiet? I guarantee that you won’t see this.
Why?
Well maybe, just maybe, they understand the cyclical demands of their market so therefore budget and run their business accordingly. If they are fully stocked in February and August, perhaps this is because they are at the “Coal Face” of this evolving market place and realise that, statistically, there is a higher proportion of the annualised used car market place available during February and August than there is in March and September, therefore they budget and run their business accordingly.
Then bear in mind that these businesses are well funded, being run by industry professionals offering more varied purchasing schemes than your in house finance company. They have grown to this level and plan to grow more, off the back of evolving and changing customer purchasing behaviour, and they are targeting their growth, by targeting your existing customers!
At the heart of this strategy and their business, is an understanding of the cyclical demand of the used car market place and running their business accordingly.
If this post has resonated with you and you would like to know more about used car strategies, rest assured help is available? The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers.
We construct and deliver used car business development programmes for dealer networks, independents and manufacturers. So if you would like to know more about our used car business development programmes, then please do not hesitate to contact either Andrew Banning or Malcolm Thomas at ajb@autoformance.com or mgt@autoformance.com
Alternatively please do not hesitate to call us on 0345 057 3177, when it will be our pleasure to help.
For more information about our services please visit our website at www.autoformance.com.
Andrew Banning.
Director.
Welcome to The Used Car Business Development Blog. This is the first post, there has to be one, so the subject for the first post had to be the answer to question I am asked most often; “Why is success in the used car market place so pivotal to our overall success?”
I am asked this questions by senior personnel representing manufacturers and the owners of either franchised or independent dealerships and although the reasoning and objectives can, on the surface, be different between manufacturers and dealers, the reality is that success in the used car market place is of paramount importance to the overall objectives of both manufacturers and dealers.
I couldn’t possibly cover every aspect of the benefits of success in the used car market place in one blog post, it would be impossible, but it should be of no coincidence to either the owners of dealerships or the senior personnel within manufacturers that the most successful new car retailers, are invariably the most successful retailers of used cars.
So just what is the opportunity and what are the benefits to both the owners of dealerships and to manufacturers, of long term success in the used car market? Well the benefits to the owners of dealerships are unlimited, we are talking about a market with unrestricted potential that can deliver benefits to the dealership as a whole.
The tentacles of a successful used car operation spread far and wide within the business increasing profits for the new car department, the service and aftersales departments, the finance department and the overall bottom line for the dealership.
Potentially, no other department within the business can match the potential to make profit that the successful used car operation has.
The Used Car Operation is not restricted by allocation or restrictions on the number of cars, the model mix and in most cases the brand. It can attract customers of all budgets and has the ability to tie customers to the both the dealership and the brand very early on in their ownership cycle, offering the potential of increased levels of reciprocal business and increased new car sales and profitability in the future.
All used cars need an element of preparation which supports and adds to the bottom line of the service and aftersales departments, including any bodyshop and smart repair operations contained within the business. Every used car sale is another finance opportunity, another warranty sale and another opportunity to generate another profit opportunity, in the form of a part exchange.
For manufacturers the upside of having a dealer network that is successful in the selling of approved used cars is immeasurable. Everything from;
- Increased new car profitability for both the manufacturer and the dealer network.
- Increased overall profitability of the dealer network, resulting in a stronger more resilient dealer network.
- The maintaining of core standards set by the manufacturer.
- Increased levels of customer loyalty to the brand.
- Increased residual values.
- More competitive financial packages and reducing costs of ownership for customers.
- Increased warranty sales.
- More control over the used car vehicle park.
- Protection of the brand.
All this and more can be achieved by the manufacturer supporting dealer networks in their growth and future success in the used car market place.
Currently the used car market sector enjoys 8 million sales per annum, 0ver 3 times the size of the new car market place, and is enjoying growth of 7% per annum.
So how do you take full advantage of the opportunity currently presented by the used car market place?
Well, everyone one reading this post will probably represent a different manufacturer or be in a different position, in terms of their current used car performance, (If they are the owner of a dealership), so there is no stock answer.
But some constants remain; no matter how successful you are currently in the used car market, you can always improve and grow, it’s just the operational focus for growth that changes. As well as the fact that success in the used car business presents some sizeable challenges, the main one being that there is no guarantee of a pre-determined level of used car stock that is going to be delivered to your business. The inconvenient truth is that if you want to sell a 1,000 used cars per annum, you are probably going to have to purchase 1,200!
If this post has resonated with you and you would like to know more about used car growth strategies, rest assured that help is available? The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers.
We construct and deliver used car business development programmes for dealer networks, independents and manufacturers. If you would like to know more about our used car business development programmes, then please do not hesitate to contact either Andrew Banning or Malcolm Thomas at ajb@autoformance.com or mgt@autoformance.com
Alternatively please do not hesitate to call us on 0345 057 3177, when it will be our pleasure to help.
For more information about our services please visit our website at www.autoformance.com.
Andrew Banning.
Used Car Business Development Director.
