Manufacturers,,,,, Be Wary Of The Business Threats Hidden In Plain Sight!,,,,,,,,,,,

 

There has been much traffic and debate on business social media platforms recently about Carwow, brokers etc. etc. In fact comments on any business model that seems to be threaten the status quo for our businesses and I say: “Get used to these threats, this is the new normal!”

 

This may sound a little harsh but it is the truth and perhaps we should stop worrying about these threats and understand that, unlike a lot of businesses models being targeted by technology entrepreneurs, you as the manufacturer and your franchise dealer networks, still hold the all the aces and must not repeat the mistakes that we made when we sleep walked into the threats that We Buy Any Car presented at our doorsteps!

 

The Automotive Sector is not alone as an industry in being targeted by outside forces and having our established markets put under threat. This is the business model of choice for technology entrepreneurs who see how advances in technology can change the way business is done in long standing established markets, and appeal to the changing purchasing habits of a proportion of our customers. If you don’t believe me, just ask your local estate agent or a taxi driver, to see how technology entrepreneurs are targeting established markets with no barriers of entry!

 

Some of these we should be worried about; We Buy Any Car is a case in point, and some we shouldn’t, Carwow is a case in point. So why do I say this? Well Carwow will only ever be as strong as the weakest link in your franchised dealer network is weak. Like Virgin Cars before them, Carwow can only be successful if they have access to stock and access to stock is in your hands and the hands of your franchise partners; make stock available to Carwow and guess what, they will have a flourishing business! If you don’t make stock available to Carwow, then they don’t!

 

However, in my opinion, although Carwow do not present the threat that We Buy Any Car do, they do present more of a threat to your long term new car success than you might at first imagine. Why? Well because they appear to be being rather clever by exploiting weaknesses in new car sales, and matching this to a demand from a proportion of purchasers, who always want to buy at the cheapest price.

 

The long term danger here is that at first glance to your franchise partners, they may actually appear to be a necessary evil, if you as the manufacturers are not more supportive and creative in how product ranges reaching the end of their production cycle are retailed/disposed of. No matter which brand you are representing, you have models that become more difficult to retail as they progress through their life cycle. It is an inconvenient truth that only one car can be the market leader, (in its class), and that no car can be the market leader throughout its production life cycle, and in the past I have seen many excellent manufacturer based initiatives to keep control of this product, reduce the perception of distress marketing and protect residual values.

 

This has included one luxury car maker actually selling cars at cost and guaranteeing to purchase them back in 12 months at the same price! Which at the time was a stroke of genius; not only did it bring customers to the brand who would not have otherwise purchased these cars, but it also avoided the perception of market wide distress marketing and most importantly, ensured their used car operations had a future supply of quality used car stock, which helped to protect residual values; key to on-going success in the new car market.

 

Your franchise dealer networks will always have to register new cars and at the end of the production cycle, and when sales begin to slow down, margins come under pressure and registration targets need to be met. At this moment Carwow may be an attractive proposition for your franchise partners, in terms of disposing of this stock holding, if they are not supported by manufacturer initiatives, and this is when you are in danger of letting the wolf through the door.

 

It is important to remember that these businesses are not charities, they are in business to make money and by allowing Carwow, (or any similar business for that matter), to set the market price of your new car product, regardless in how small a proportion of the market, you are putting future residual values in the hands of third party businesses with no loyalty to you, only their own business and their own aspirations and it is unlikely that they are going to be aligned with yours.

 

They like you need customers to survive, but without product they have no customers, so much thought must be given to the long term ramifications of allowing your franchise partners to give their problems of today to third party businesses, in this misguided perception that they have gained the advantage, because they, and you as the manufacturer, have not.

 

For sure both you as the manufacturer and your franchise partners have got money in the bank, you have disposed of product and reached your registration targets, but this has been achieved by handing a business over to your competitors on a plate! In effect this means you have supported a competitor business and my advice would be to be mindful of the Trojan Horse Business Model of these new up and coming technology based businesses.

 

Like We Buy Any Car they see the inherent weaknesses in your business model and they are targeting it, just as they are many other established markets, because they see the revenues to be made; and before you know it they have customers of their own, who should be your customers, and they have grown powerful.

 

My challenge to manufacturers would be this; if these models of business are viable, why are you not employing them yourselves? And if you are, like some manufactures who are moving to online purchasing models, deploy some joined up thinking to this process and look beyond the immediate business needs of the new car sale.

 

There is no doubt that consumer purchasing habits are changing and evolving at a rapid pace, and the technology model will be vital to your on-going success in the new car market. In fact I was chatting recently to someone who has been instrumental in launching on-line purchasing models for manufacturers and was enthusing about just how brilliant the platform was, and having looked at it, I agree. But one thing troubled me; during the conversation I asked just one simple question; “How is any part exchange valued?” The answer; “Via third party auction software!” 

 

Now the long term ramifications of strategic business decisions like these are a post in themselves and I will be returning to this subject in a future post, because I am concerned for some manufactures, those I see handing over the most important business they have, (in terms of their future new car success), to third party partners, thinking it is a short term price worth paying for new car registrations today.

 

Now out of respect, I will add the caveat that it is not for me to tell anyone how to run their business, but at the risk of repeating myself, I cannot stress enough that the success of your future new car business has it’s foundations in your success in the used car market; it is the shared and common objective that binds manufacturers to their franchise dealer networks and you must be careful in applying too much short term thinking to the new car challenges of today.

 

With new car registrations declining year to date, how the UK automotive industry faces the challenges of tougher trading conditions in the new car market, will be interesting to observe, especially in regard to the used car market and individual manufacturer used car market strategy during this period. Will some manufacturers and their dealer networks continue to hand their new, nearly new or used car stock problems over to competitors and feed independent competitor businesses? I don’t know but it will be fascinating to observe?

 

This will be a challenging period and I fully accept that resilient and successful used car operations are not “A Given” for manufacturers, but luckily help is available and if this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

 

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. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com  

 

Alternatively please feel free to call us on 0345 057 3177.

 

For more information about our services please visit our website at www.autoformance.com  

 

Andrew Banning.

Used Car Business Development Director.

Franchise Dealers,,,,, Be Wary Of The Business Threats Hidden In Plain Sight!,,,,,,,,,,,

There has been much traffic and debate on business social media platforms recently about Carwow, brokers etc. etc. In fact comments on any business model that seems to be threaten the status quo within the automotive sector and I say: “Get used to these threats, this is the new normal!”

 

I don’t want this statement to sound overly harsh or to be dismissive of the threats posed by some of these aggressive business models, but it is the truth and perhaps we should stop worrying about these threats and begin to gain confidence from the fact that, unlike a lot of businesses models being targeted by technology entrepreneurs, you as the franchise dealer network and the manufacturer you represent, still hold the all the aces and must not repeat the mistakes that we made when we sleep walked into the threats that We Buy Any Car presented at our doorsteps!

 

The Automotive Sector is not alone as an industry in being targeted by outside forces and having our established markets put under threat. This is the business model of choice for technology entrepreneurs who see how advances in technology can change the way business is done in long standing established markets, and appeal to the changing purchasing habits of a proportion of our customers. If you don’t believe me, just ask your local estate agent or a taxi driver, to see how technology entrepreneurs are targeting established markets with no barriers of entry, changing the way business is being done and taking the profits that they once took for granted!

 

Some of these we should be worried about; We Buy Any Car is a case in point, and some we shouldn’t, (yet), Carwow is a case in point. So why do I say this? Well Carwow will only ever be as strong as the weakest link in your franchised dealer network is weak. Like Virgin Cars before them, the idea is an excellent one but Carwow can only be successful and a threat to your business, if they have access to stock and access to stock is in your hands and the hands of your fellow franchise partners; make stock available to Carwow and guess what, they will have a flourishing business! If you don’t make stock available to Carwow, then they won’t!

 

However, in my opinion, although Carwow do not present the initial threat that We Buy Any Car did, they do present more of a threat to your long term new car success than you might at first imagine. Why? Well because they appear to be being rather clever by exploiting weaknesses in new car sales, and matching this to a demand from a proportion of purchasers, who always want to buy at the cheapest price.

 

The long term danger here is that at first glance to you and your fellow franchise partners, they may actually appear to be a necessary evil, if manufacturers are not more supportive and creative in how product ranges reaching the end of their production cycle are retailed/disposed of. No matter which brand you are representing, you will have models that become more difficult to retail as they progress through their life cycle. It is an inconvenient truth that only one car can be the market leader, (in its class), and that no car can be the market leader throughout its production life cycle, and in the past I have seen many excellent manufacturer based initiatives that have helped their franchise dealer networks to keep control of this product, reduce the perception of distress marketing and protect residual values.

 

This has included one luxury car maker actually selling cars at cost and guaranteeing to purchase them back in 12 months at the same price! Which at the time was a stroke of genius; not only did it bring customers to the brand who would not have otherwise purchased these cars, but it also avoided the perception of market wide distress marketing and most importantly, ensured their used car operations had a future supply of quality used car stock, which helped to protect residual values; key to on-going success in the new car market.

 

As a franchise dealer you will always have to register new cars and at the end of the production cycle, and when new car sales begin to slow down, margins come under pressure and registration targets need to be met. At this moment Carwow may appear to be an attractive proposition for you, in terms of disposing of this stock holding and achieving a registration target/bonus, if you are not fully supported by manufacturer initiatives, and this is when you are in danger of letting the wolf in through the door.

 

It is important to remember that these businesses are not charities, they are in business to make money and by allowing Carwow, (or any similar business for that matter), to set the market price of your new car product, regardless in how small a proportion of the market, you are putting future residual values in hands of third party businesses with no loyalty to you, only their own business and their own aspirations and it is unlikely that they are going to be aligned with yours.

 

Like you they need customers to survive, but without product they have no customers, so much thought must be given to the long term ramifications of handing your stock problems of today over to third party businesses, in the misguided perception that you have gained the advantage, because you have not.

 

For sure both you as the business and the manufacturer you represent have got money in the bank, you have disposed of product and reached your registration targets, but this has been achieved by handing a business over to your competitors on a plate! In effect this means you have supported a competitor business and my advice would be to be mindful of the Trojan Horse Business Model of these new up and coming technology based businesses.

 

Like We Buy Any Car they see the inherent weaknesses in your business model and they are targeting it, just as they are targeting many other established markets, because they see the revenues to be made; and before you know it they have customers of their own, who should be your customers, and they have grown powerful.

 

If you want to know the size of threat, take 30 minutes out of your schedule and imagine you are a customer; then log on to the Carwow website and have a browse and look at the broad selection of product on offer and the savings listed, then ask yourself two honest questions; “Should I Really Be Supporting This Business?” and “Where Is This Going To End?”

 

The first is not a question for me to answer, it is your business and your future success at risk, not mine. We at Autoformance could just as easily be supplying Used Car Business Development expertise to Carwow, as we can for franchise dealer networks. The second is all conjecture at the moment but I have seen the website and I can only imagine the investment required to launch this business.

 

Institutional investors like this will have a plan, today it is apparent that they are targeting the new car market, but how long will it be before they move on to the other markets, especially the used car market? With the platform they have, it would not take them long to be attacking more of the business you currently take for granted.

 

My challenge to franchise dealer networks and the manufacturers you represent would be this; if these models of business are viable, (and they obviously are as they reflect the changing purchasing habits of our customers), why are you not employing them yourselves? As Oscar Wilde famously said; “Imitation is the Sincerest Form of Flattery” so if the on-line model is so successful and growing, the way to challenge these threats, is to meet them head on.

 

There is no doubt that consumer purchasing habits are changing and evolving at a rapid pace, and an evolving technology model will be vital to your on-going success in the new car market. Some of you will be lucky and be representing some manufactures who are moving to online purchasing models, in fact I was chatting recently to someone who has been instrumental in launching on-line purchasing models for manufacturers and was enthusing about just how brilliant the platform was, and having looked at it, I agree.

 

But one thing troubled me; during the conversation I asked just one simple question; “How is any part exchange valued?” The answer; “Via third party auction software!” Now the long term ramifications of strategic business decisions like these are a post in themselves and I will be returning to this subject in a future post, because I am concerned for some manufactures and their franchise dealer networks, those I see handing over the most important business they have, (in terms of their future new car success), to third party partners, thinking it is a short term price worth paying for new car registrations today.

 

Now out of respect, I will add the caveat that it is not for me to tell anyone how to run their business, but at the risk of repeating myself, I cannot stress enough that the success of your future new car business has it’s foundations in your success in the used car market; it is the shared and common objective that binds manufacturers to their franchise dealer networks and you must be careful in applying too much short term thinking to the new car challenges of today.

 

With new car registrations declining year to date, how the UK automotive industry faces the challenges of tougher trading conditions in the new car market, will be interesting to observe, especially in regard to the used car market and individual manufacturer used car market strategy during this period. Will some manufacturers and their dealer networks continue to hand their new, nearly new or used car stock problems over to competitors and feed independent competitor businesses? I don’t know but it will be fascinating to observe.

 

This will be a challenging period and I fully accept that resilient and successful used car operations are not “A Given” for manufacturers or their franchise dealer networks, but as we move into these evolving markets, your success in the used car market is going to be vital to protecting your new car business as a whole.

 

Luckily help is available and if this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car operation on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

 

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. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com

 

Alternatively please feel free to call us on 0345 057 3177.

 

For more information about our services please visit our website at www.autoformance.com

 

Andrew Banning.

Used Car Business Development Director.

Used Car Stock Profiling And The Importance Of Listening To The Bad News! (Manufacturer Article)

For those of you who read my recent post; Used Car Growth and Einstein’s Definition of Insanity and have franchise partners who have subsequently booked one of our Strategic Budgeting Review Consultancy Days, one of the subjects we will be discussing with them during the day will be opening Used Car Stock Levels and Used Car Stock Profiling. 

 

I am often asked about this subject and whether it is “The Answer” to growing your used car business and once again I remind everyone that yes, this is a very important element of your strategic planning, for your dealer network, but there is no single answer or “Silver Bullet” to the question of how we grow used car operations, rather that it is a continual focus on all the operational areas affecting the performance of the business, and understanding that they are all inextricably linked.

 

Take improving used car stock turn rates, which are of paramount importance to the overall profitability of your dealer network, (and thus a separate post in their own right); they may not see it at first glance but the difference in the utilisation of funds employed to their used car stock holding, between having an average stock turn rate of 60 days per unit, compared to 45 days per unit, is vast; businesses need less money invested in stock, pay less interest etc. etc. etc.

 

And stock profiling and planning the opening used car stock levels is one of the key strategic areas of used car performance, which as businesses grow, becomes more and more important as the business evolves; thus the attention we shall pay to this area of the business during our day on site.

 

I can’t possibly cover the whole issue of stock profiling in one post; for one, everyone’s perspective and immediate requirement will be different, but regardless of where a business is in its used car growth journey, some principles always remain the same. The first is that, like all used car operations, it has one key choice to make when deciding to invest in a used car stock holding; Do we want our used car operation to be driven by market demand or do we want to try and drive the market via the stock holding we have?

 

There is a subtle but very important difference between these two statements; on the Do we want our used car operation to be driven by market demand side of the argument, the business is listening to what customers are asking for and then investing in used car stock accordingly, knowing full well that there should be an immediate demand for the stock holding it is investing in. However on the Do we want to try and drive the market via the stock holding we have side of the argument, the business is effectively saying that it will invest in any unplanned profile of used car stock holding and then look to try and find customers for that stock holding.

 

Now that is a significantly more difficult business model to run, thus my comments in my recent post; How Much Is A Used Car Worth? Only As Much As Someone Is Prepared To Pay, where I questioned the rush to all non-petrol/diesel production models that some manufacturers are committing to, before assessing whether there will be the demand for this volume of non-petrol/diesel stock when it enters the most cruel of markets; the used car market?

 

Anyway, back to used car stock profiling, and one tip I can offer everyone reading this post; it was piece of advice given to me many years ago when I was starting my career as a used car professional and it was this; “The person bearing the bad news, regardless of the circumstances, is always the person you should be listening to first!”

 

So how do we apply this single piece of advice to growing our used car operation via effective stock profiling? Well his premise was that for sure, it is lovely to speak to all the people who had purchased a used car from you, as an exercise in self adulation it has no bounds, but as much as this feedback is important, it is not as important as the feedback from the customers who didn’t by a used car from you!

 

The first morning of every week he called every one of these customers, to ascertain why they didn’t purchase a used car from his business; was it that they didn’t have the car they wanted and if so what was the car they wanted? Only then did he ring all the customers who did purchase from them, to see whether they had purchased the car they wanted and if not, what they had first enquired for?

 

Now, as much as this is not the answer to all our stock profiling needs, (we will be covering a lot more during our day on site with the dealers), it is a very important piece of the jigsaw. Those of you who regularly read my used car business development blog, know that I like an analogy between used car operations and selling sweets, and this principle goes to the very heart of this piece of advice; if you owned a sweet shop and successfully sold Mars Bars, but a proportion of your customers came in every day asking for a Crunchie, and you didn’t have them for sale, what would you be buying when you next stocked up?

 

If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

 

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. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com

 

Alternatively please feel free to call us on 0345 057 3177.

 

For more information about our services please visit our website at www.autoformance.com  

 

Andrew Banning.

Used Car Business Development Director.

Used Car Stock Profiling And The Importance Of Listening To The Bad News! (Dealer Article)

 

For those of you who read my recent post; Used Car Growth and Einstein’s Definition of Insanity and have subsequently booked one of our Strategic Budgeting Review Consultancy Days, one of the subjects we will be discussing during the day will be opening Used Car Stock Levels and Used Car Stock Profiling. 

I am often asked about this subject and whether it is “The Answer” to growing your used car business and once again I remind everyone that yes, this is a very important element of your strategic planning, but there is no single answer or “Silver Bullet” to the question of how we grow used car operations, rather that it is a continual focus on all the operational areas affecting the performance of the business, and understanding that they are all inextricably linked.

Take improving used car stock turn rates, which are of paramount importance to your overall profitability, (and thus a separate post in their own right); you may not see it at first glance but the difference in the utilisation of funds employed to your used car stock holding, between having an average stock turn rate of 45 days per unit, compared to 60 days per unit, is vast; you need less money invested in stock, pay less interest etc. etc. etc.

And stock profiling and planning your opening used car stock levels is one of the key strategic areas of used car performance, which as you grow, becomes more and more important as your business evolves; thus the attention we shall pay to this area of the business during our day on site.

I can’t possibly cover the whole issue of stock profiling in one post; for one, everyone’s perspective and immediate requirement will be different, but regardless of where you are in your used car growth journey, some principles always remain the same. The first is that we all have one key choice to make when we make a decision to invest in a used car stock holding; Do we want our used car operation to be driven by market demand or do we want to try and drive the market via the stock holding we have?

There is a subtle but very important difference between these two statements; on the Do we want our used car operation to be driven by market demand side of the argument, we are listening to what our customers are asking for and we are investing in used car stock accordingly, knowing full well that there should be an immediate demand for the stock holding we are investing in. However on the Do we want to try and drive the market via the stock holding we have side of the argument, we are effectively saying that we will invest in any unplanned profile of used car stock holding and then look to try and find customers for that stock holding.

Now that is a significantly more difficult business model to run, thus my comments in my recent post; How Much Is A Used Car Worth? Only As Much As Someone Is Prepared To Pay, where I questioned the rush to all non-petrol/diesel production models that some manufacturers are committing to, before assessing whether there will be the demand for this volume of non-petrol/diesel stock when it enters the most cruel of markets; the used car market?

Anyway, back to used car stock profiling, and one tip I can offer everyone reading this post; it was piece of advice given to me many years ago when I was starting my career as a used car professional and it was this; “The person bearing the bad news, regardless of the circumstances, is always the person you should be listening to first!”

So how do we apply this single piece of advice to growing our used car operation via effective stock profiling? Well his premise was that for sure, it is lovely to speak to all the people who had purchased a used car from you, as an exercise in self adulation it has no bounds, but as much as this feedback is important, it is not as important as the feedback from the customers who didn’t by a used car from you!

The first morning of every week he called every one of these customers, to ascertain why they didn’t purchase a used car from his business; was it that they didn’t have the car they wanted and if so what was the car they wanted? Only then did he ring all the customers who did purchase from them, to see whether they had purchased the car they wanted and if not, what they had first enquired for?

Now, as much as this is not the answer to all our stock profiling needs, (we will be covering a lot more during our day on site), it is a very important piece of the jigsaw. Those of you who regularly read my used car business development blog, know that I like an analogy between used car operations and selling sweets, and this principle goes to the very heart of this piece of advice; if you owned a sweet shop and successfully sold Mars Bars, but a proportion of your customers came in every day asking for a Crunchie, and you didn’t have them for sale, what would you be buying when you next stocked up?

If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car operation on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

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. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com

Alternatively please feel free to call us on 0345 057 3177.

For more information about our services please visit our website at www.autoformance.com.

Andrew Banning.
Used Car Business Development Director.

Used Car Remarketing and Einstein’s Definition of Insanity!,,,,,,,, (Manufacturer Article)

 

As we approach the time of year when our thoughts begin to wander towards the objectives for 2018 and budgeting for growth, I thought it prudent to revisit Einstein’s famous quote on the definition of insanity; “Doing The Same Thing Over And Over Again And Expecting Different Results!"

Unashamedly I quote Einstein regularly on this as I feel it can bring some clarity to the whole process of planning for growth year on year, and in terms of the focus that that planning process requires. I work on the premise, (quite rightly), that if you continue to do the same things in your business, you will continue to achieve the same results, thus the fact that expecting the outcome to be any different, is madness.

I’m sure that every manufacturer, just like every dealer network and franchised dealership, will have a different set of objectives, (and therefore a different focus), but the one thing that remains constant between us all is the importance of understanding what is happening in the used car market and how that is going effect your new car objectives.

What is happening to your product in the used car market place is going to directly affect your new car aspirations, because what happens here will do more to effect the future residual values of your product range than any manipulation of future residual values attempted within your organisation, or indeed your in-house finance company, and as such, it will directly influence the cost of ownership of your new car product in the future. 

So although it may not be the first priority for the manufacturer planning the immediate growth in their new car sales volumes, if you want to succeed on a continual basis, the performance of your franchised dealer network, (in terms of their used car performance), is going to be of paramount importance in dictating the future cost of ownership for your new car product of the future, and therefore your new car performance as a whole.

The importance of supporting the marque and controlling, (as much as is possible for any market), the used vehicle park as it returns from its first period of ownership, really is a shared objective between the manufacturer and their franchised partners, the importance of which, is sometimes overlooked. Therefore if I was responsible and/or involved at a senior level with the sales strategy within a manufacturer, my thoughts would be turning to what is happening within my dealer network at this time of year, and how my franchise partners will be supporting our shared on-going new car objectives, by securing their success in the used car market.

The importance of your franchise partners planning, (both financially and operationally), for the growth of their used car operations must never be underestimated; if the success of your new car business and your total business as whole, is dependent on having a growing and successful network of used car operations, (and I promise you it is), it is important that time is taken by your franchise partners to think about their used car growth objectives for the next year and what will be required, in terms of financial and operational investment, in order to ensure that their objectives for growth are going to be achieved.

Adding to the complexities for you as the manufacturer is the fact that all your franchise partners will be at different stages in their evolution as a used car retailer and the more successful their individual used car operations become, the more involved this process becomes; and to compound matters for your franchise partners, the focus for growth and the investments required to deliver growth over and above their current level of performance, changes year on year dependent on where they are in their used car growth journey.

Unfortunately your franchise partners can’t take it for granted that the process and operational procedures that got their used car operations to where they are today, will necessarily be the focus and operational procedures required for where you need them to be operating at tomorrow. For sure we mustn’t be in a rush to change what has got both you, as the manufacturer, and your dealer network to where you are today, it has worked after all, but the operational structure and financial investment in used car operations that got your franchise dealer network to where they are today, are likely to be unrecognisable compared to the operational structure and financial investment required, in order to get the used car operations contained within your franchised dealer network to where you need them to be!

So quite understandably this process can take much thought as well as a level of strategic knowledge and experience, and once your franchise partners have identified what is required, in order to meet their used car growth aspirations for next year and support their, (and your), new car aspirations, they are going to have to make sure that all the components required to achieve the objectives, are in place within their business before the year begins.

They may need more staff, they may be at the stage where they need to split their teams and amend their operational procedures within the business; they will certainly need more used car stock and more money/improvements in their current rate of stock turn, in order to be able to run with the stock levels required to achieve their growth objectives, and perhaps much more?

This whole process can be bewildering but it is where Autoformance can help, with our Strategic Budgeting Review Consultancy Day. Normally this bespoke consultancy module would be delivered as part of our Used Car Business Development Consultancy Programme, but it has proved to be so popular and requested year on year by our clients, that we have decided to offer this service as an individual days consultancy for new clients and the used car networks of manufacturers.

Delivered by one of the founding directors of our business, during the day on site we will review the key business areas of attention required in budgeting and planning, for the growth of used car operations, including;

• Stock Turn Review.
• Adherence to manufacturer core standards.
• Staffing structure including departmental and individual targeting.
• Used car stock acquisition.
• Current budgeting review.
• Cyclical demand.
• Stock levels and profiling.

This day on site will also encompass a presentation to the senior management team and a written report including our recommendations, aligned specifically to their growth aspirations for next year. 

So if this post has resonated with you and you would like to know more about our Strategic Budgeting Review Consultancy Day, as well as the opportunity to work with an organisation of professionals who have faced the challenges of fast paced evolutionary used car markets, and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

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. If you would like to explore how our Strategic Budgeting Review Consultancy Day can be offered to your dealer network, you have any questions about this initiative, or you would like to have an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, then please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com

Alternatively please feel free to call us on 0345 057 3177.

For more information about our services please visit our website at www.autoformance.com

Andrew Banning.
Used Car Business Development Director.

Used Car Growth and Einstein’s Definition of Insanity!,,,,,,,, (Dealer Article)

 

As we approach the time of year when our thoughts begin to wander towards the objectives for 2018 and budgeting for growth, I thought it prudent to revisit Einstein’s famous quote on the definition of insanity; “Doing The Same Thing Over And Over Again And Expecting Different Results!"

Unashamedly I quote Einstein regularly on this as I feel it can bring some clarity to the whole process of planning for growth year on year, and in terms of the focus that this planning process requires. I work on the premise, (quite rightly), that if you continue to do the same things in your business, you will continue to achieve the same results, thus the fact that expecting the outcome to be any different, or expecting to just deliver year on year growth to your used car operation, is madness.

The importance of planning, (both financially and operationally), for the growth of your used car operation must never be underestimated; if the success of your new car business and your total business as whole, is dependent on having a growing and successful used car operation, (and I promise you it is), it is important that time is taken to think about the used car growth objectives for the next year and what will be required, in terms of financial and operational investment, in order to ensure that the objectives for growth are going to be achieved.

And the more successful your used car operation becomes, the more involved this process becomes and to compound matters, the focus for growth and the investments required to deliver growth over and above your current level of performance, changes year on year dependent on where you are in your growth journey. So we can’t even take it for granted that the process that got you to where you are today, will necessarily be the focus for where you want to go tomorrow; for sure we mustn’t be in a rush to change what has got you to where you are today, (it has worked after all), but the operational structure and financial investment that got you to here, may be unrecognisable compared to the operational structure and financial investment required, in order to get you to where you want to go!

So quite understandably this process can take much thought as well as a level of strategic knowledge and experience, and once you have identified what is required for the growth aspirations for next year, you have to make sure that all the components required to achieve the objectives, are in place within the business before the year begins. You may need more staff, you may be at the stage where you need to split your teams and amend your operational procedures within the business; you will certainly need more used car stock and more money/improvements in your current rate of stock turn, in order to be able to run with the stock levels required to achieve your growth objectives, and perhaps much more?

This whole process can be bewildering but it is where Autoformance can help, with our Strategic Budgeting Review Consultancy Day. Normally this bespoke consultancy module would be delivered as part of our Used Car Business Development Consultancy Programme, but it has proved to be so popular and requested year on year by our clients, that we have decided to offer this service as an individual days consultancy for new clients.

Delivered by one of the founding directors of our business, during the day on site we will review the key business areas of attention required in budgeting and planning, for the growth of your used car operation, including;

• Stock Turn Review.
• Staffing structure including departmental and individual targeting.
• Used car stock acquisition.
• Current budgeting review.
• Cyclical demand.
• Stock levels and profiling.

This day on site will also encompass a presentation to the senior management team and a written report including our recommendations, aligned specifically to your growth aspirations for next year. 

So if this post has resonated with you and you would like to know more about our Strategic Budgeting Review Consultancy Day, as well as the opportunity to work with an organisation of professionals who have faced the challenges of fast paced evolutionary markets, and know how to develop a successful and profitable used car operation on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

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. If you would like to book your Strategic Budgeting Review Consultancy Day, you have any questions about the day, or you would like to have an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com  

Alternatively please feel free to call us on 0345 057 3177.

For more information about our services please visit our website at www.autoformance.com.

Andrew Banning.
Used Car Business Development Director.

How Much Is A Used Car Worth?,,,,,,,, Only As Much As Someone Is Prepared To Pay! (UK Manufacturer Article)

This is a statement that we should never lose sight of in the Automotive Sector and I ponder it today more than ever after some of the statements coming out of Governments and Manufacturers regarding all-electric cars, in fact any car that is more emissions efficient including hybrids and mild hybrids.

I don’t want to delve into my personal thoughts here, just how I feel this headline statement may have to change the mind-sets of some manufacturers, and governments for that matter, who by the way are past masters at making statements without thinking and fooling themselves that they can control markets.

The UK governments recent statement about an all-electric car policy from 2040 is interesting, not only in its folly, but because they seem to take for the granted the fact that all manufacturers will be producing all-electric cars by then and that if they are not, the lure of the UK market will be so strong that they will have to switch to all-electric production, just so they can serve the UK market.

Well the world is littered with manufacturers who don’t import into the UK so luckily, they have built in enough time to change their mind and I for one am relieved. Quite understandably manufacturers tend to enjoy the business model where they produce the cars that people actually want to purchase, the ones who don’t are doomed to fail, and in the recent past we only have to look at the story of SAAB, in order to see how things can all go terribly wrong in the blinking of an eye.

Luckily for the industry it would appear that a “Guinea Pig” for the non-petrol and non-diesel model range has appeared on the horizon and I’m sure that everyone in the industry will be watching with interest. Volvo’s decision, (and I know many of you reading this are my connections at Volvo), to make no solely diesel and solely petrol cars from 2019 is interesting, especially in terms of the rush to market.

It is not my place to comment on the decision, it could equally turn out to be incredibly forward thinking, as much as proving challenging, but it will be interesting to see how the owners of Volvo combine the challenges of switching to all electric/hybrid/mild hybrid production model range and the effect that this policy, being delivered so sweepingly and in the near future, will have on the used car values for Volvo product, (in the short term), in the UK.

I appreciate that the UK is only one of Volvo’s markets and I have no idea how critical the UK market is to the overall success of Volvo as a global manufacturer, but one thing I do know is that strong residual values and a dealer network that is successful in the retailing of used cars, are of paramount importance to the success of any manufacturers new car aspirations.

Those of you who read my recent post about the importance of PCP’s; http://usedcarbusinessdevelopment.blogspot.co.uk/2017/07/pcps-retaining-customers-and.html  and/or who follow my blog, http://usedcarbusinessdevelopment.blogspot.co.uk/ will know my thoughts on how important PCP’s have been in the growth of the new car market and in meeting the changing purchasing habits of new car consumers, but what happens when the car returns from the first owner is critical in the on-going affordability of new cars.

New car customers may be sympathetic to a view on electric and hybrid cars, but invariably they are not generally willing to pay over the odds, (on mass), to support that view. If customers are now, (in the main), using PCP’s as the financial model of car ownership, this will pose a challenge for all the makers of electric and hybrid models; what happens when they reach the used car market and how much are they worth?

And by this I don’t mean the manufacturer’s perspective of value or the future residual value set by the in-house finance company, I mean it’s actual market value; the price at which a business, be it one of their franchise partners or an independent retailer, will write out a cheque for, in order to acquire that car, confident in the knowledge that the car represents a good profit opportunity for their business.

This is normally the first moment in a cars life when the manufacturer loses control, because they can’t control the used car market like they can the new car market. For a car to be sold as a used car, it has first to be purchased by a business, either a member of their franchise dealer network or an independent dealer, who is then confident that they can sell that car and make a profit; and this only happens when the buying public perceive the car as both desirable and “Value for Money.”

The fascinating point in all this for me will be how both the dealers and the used car buying public take to the thought of stocking, retailing and owning these all electric/hybrid/mild hybrid cars; if they don’t then residuals values are likely to plummet and/or fall short of the guaranteed future residual value required, in order to leave the new cars competitively priced in the new car market on monthly rental basis via a PCP agreement, or indeed any finance agreement involving a future guaranteed residual value.

Now the monthly rental figure for new car customers can be controlled to a certain extent by the manufacturer and their in-house finance company, if they make a decision to bridge the gap between the future residual value and the guaranteed value required, in order to remain competitive in the market, (in terms of the monthly rental/payment value), but this process does cost money.

However, this is not an option available to the manufacturer in the used car market and this is the market that is over 3 times the size of the new car market in the UK and the one that is critical to the new car success of any manufacturer. The used car market is an unforgiving market where the preferred business model is thus;

Businesses invest in stock when it is available at a price that they perceive they can then retail with a margin that will result in them making a profit and if they don’t think the market is ready for the product, because customers are not asking for it, they will not purchase that stock and then actively try to sell it.

Thus my question in the heading for this post, and the answer. It will be interesting to see just how this plays out for Volvo and all the manufacturers producing all-electric/hybrid/mild hybrid cars for sale in the UK. I know the used car market and how fickle and cruel a mistress it can be, and it will take much planning, resilient approved used car programmes and successful used car operations within their franchise dealer networks, (and maybe some deep pockets in the short term), to support this drive to all alternatively powered cars and to ensure that demand can be created in the used car market place.

And all this will be vital, especially the ability of the used car operations within their franchise dealer network, to stock and sell these cars in the volumes that are going to be required and at the prices required, in order to support the new car aspirations of this move to all electric/hybrid/mild hybrid production. And complicating matters for manufacturers is the fact that the used car business is very different to the new car business; yes at its core it involves the selling of cars in order to be successful, but operationally it is a different animal and requires different skills-sets from those required for success in the new car market.

Luckily help is available and if this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

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. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com  

Alternatively please feel free to call us on 0345 057 3177.

For more information about our services please visit our website at www.autoformance.com

Andrew Banning.
Used Car Business Development Director.

How Much Is A Used Car Worth?,,,,,,,, Only As Much As Someone Is Prepared To Pay! (European Markets Article)

This is a statement that we should never lose sight of in the Automotive Sector and I ponder it today more than ever after some of the recent statements made by Manufacturers regarding all-electric cars, in fact any car that is more emissions efficient including hybrids and mild hybrids.

I don’t want to delve into my personal thoughts here, just how I feel this headline statement may have to change the mind-sets of some manufacturers, and governments for that matter, who by the way are past masters at making statements without thinking and fooling themselves that they can control markets.

The UK governments recent statement about an all-electric car policy from 2040 is interesting, not only in its folly, but because they seem to take for granted the fact that all manufacturers will be producing all-electric cars by then and that if they are not, the lure of the UK market will be so strong that they will have to switch to all-electric production, just so they can serve the UK market.

Well the world is littered with manufacturers who don’t import into the UK so luckily, they have built in enough time to change their mind and I for one am relieved. Quite understandably manufacturers tend to enjoy the business model where they produce the cars that people actually want to purchase. The ones who don’t are doomed to fail and in the recent past we only have to look at the story of SAAB, in order to see how things can all go terribly wrong in the blinking of an eye.

Luckily for the industry it would appear that a “Guinea Pig” for the non-petrol and non-diesel model range has appeared on the horizon and I’m sure that everyone in the industry will be watching with interest. Volvo’s decision, (and I know many of you reading this are my connections at Volvo), to make no solely diesel and solely petrol cars from 2019 is interesting, especially in terms of the rush to market.

It is not my place to comment on the decision, it could equally turn out to be incredibly forward thinking, as much as proving challenging, but it will be interesting to see how the owners of Volvo combine the challenges of switching to all electric/hybrid/mild hybrid production model range and the effect that this policy, being delivered so sweepingly and in the near future, will have on the used car values for Volvo product, (in the short term), in all European markets.

I appreciate that Continental Europe is only one of Volvo’s markets and I have no idea how critical the market is to the overall success of Volvo as a global manufacturer, but one thing I do know is that strong residual values and a dealer network that is successful in the remarketing and retailing of used cars, are of paramount importance to the success of any manufacturers new car aspirations.

Those of you who read my recent post about the importance of PCP’s; http://usedcarbusinessdevelopment.blogspot.co.uk/2017/07/pcps-retaining-customers-and.html  and/or who follow my blog, http://usedcarbusinessdevelopment.blogspot.co.uk/ will know my thoughts about how important PCP’s have been in the growth of the new car market in the UK, and I am sure that all manufacturers will have strategies in place to grow other new car markets, by utilising the appeal of PCP’s and the new car ownership benefits that they can offer customers.

In the UK PCP’s have been an instrument of growth by meeting the changing purchasing habits of new car consumers, but regardless of how a new car is purchased, (either via a finance agreement or a straight cash purchase), what happens when the car returns from the first period of ownership is critical to the on-going affordability of new cars.

New car customers may be sympathetic to a view on electric and hybrid cars, but invariably they are not generally willing to pay over the odds, (on mass), to support that view. If new car customers in the UK are now, (in the main), using PCP’s as the financial model of car ownership, and other European markets embrace how PCP’s can be leveraged to grow new car sales, then this will pose an ever growing challenge for all the makers of electric and hybrid models; what happens when they reach the used car market and how much are they worth?

And by this I don’t mean the manufacturer’s perspective of value or the future residual value set by the in-house finance company, I mean it’s actual market value; the price at which a business, be it one of their franchise partners or an independent retailer, will write out a cheque for, in order to acquire that car, confident in the knowledge that the car represents a good profit opportunity for their business.

This is normally the first moment in a cars life when the manufacturer loses control, because manufacturers can’t control the used car market like they can the new car market. For a car to be sold as a used car, it has first to be purchased by a business, either a member of their franchise dealer network or an independent dealer, who is then confident that they can sell that car and make a profit; and this only happens when the buying public perceive the car as both desirable and “Value for Money.”

The fascinating point in all this for me will be how both the dealers and the used car buying customers take to the thought of stocking, retailing and owning these all electric/hybrid/mild hybrid cars; if they don’t then residual values are likely to plummet and this will result in a very challenging new car trading environment for manufacturers.

Why? Well cash purchase customers will be presented with an increasing cost to change to a new car and will be more likely to delay the decision to purchase a new car, and for those customers who have embraced the purchasing benefits of a PCP agreement, (or indeed any purchasing agreement involving a guaranteed future residual value), the future market value is likely to fall short of the guaranteed future residual value required, in order to leave the new cars competitively priced in the new car market on monthly rental basis via a PCP agreement, or indeed any finance agreement involving a future guaranteed residual value.

Now the monthly rental figure for new car customers can be controlled to a certain extent by the manufacturer and their in-house finance company, if they make a decision to bridge the gap between the future residual value and the guaranteed value required, in order to remain competitive in the market, (in terms of the monthly rental/payment value), but this process does cost money.

However, this is not an option available to the manufacturer in the used car market and this is the market that is critical to the new car success of any manufacturer. The used car market is an unforgiving market where the preferred business model is thus;

Businesses invest in stock when it is available at a price that they perceive they can then retail with a margin that will result in them making a profit and if they don’t think the market is ready for the product, because customers are not asking for it, they will not purchase that stock and then actively try to sell it.

Thus my question in the heading for this post, and the answer. It will be interesting to see just how this plays out for Volvo and all the manufacturers producing all-electric/hybrid/mild hybrid cars for sale in the UK and Continental Europe. I know the used car market and how fickle and cruel a mistress it can be, and it will take much planning, resilient approved used car remarketing programmes and successful used car operations within their franchise dealer networks, (and maybe some deep pockets in the short term), to support this drive to all alternatively powered cars and to ensure that demand can be created in the used car market place.

And all this will be vital, especially the ability of the used car operations within their franchise dealer network, to stock and sell these cars in the volumes that are going to be required and at the prices required, in order to support the new car aspirations of this move to all electric/hybrid/mild hybrid production. And complicating matters for manufacturers is the fact that the used car business is very different to the new car business; yes at its core it involves the selling of cars in order to be successful, but operationally it is a very different business and requires different skills-sets from those required for success in the new car market.

Luckily help is available and if this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

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. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com

Alternatively please feel free to call us on 0044 345 057 3177.

For more information about our services please visit our website at www.autoformance.com  

Andrew Banning.
Used Car Business Development Director.

How Much Is A Used Car Worth?,,,,,,,, Only As Much As Someone Is Prepared To Pay! (Dealer Article)

As professionals in the Automotive Sector this is a statement that we should never lose sight of and I ponder it today more than ever after some of the recent statements coming out of Governments and Manufacturers regarding all-electric cars, in fact any car that is more emissions efficient, including hybrids and mild hybrids.

I don’t want to delve into my personal thoughts here, just how I feel this headline statement may have to change the mind-sets of some manufacturers, and governments for that matter, who by the way are past masters at making statements without thinking and fooling themselves that they can control markets.

The UK governments recent statement about an all-electric car policy from 2040 is interesting, not only in its folly, but because they seem to take for granted a couple of very important points; the first is that there will be the demand from consumers to purchase only all-electric/hybrid/mild hybrid cars by this date, and secondly, that all manufacturers will be producing all-electric cars by then and that if they are not, the lure of the UK market will be so strong that they will have to switch to all-electric production, just so they can serve the UK market.

Well on the former point; the world is littered with manufacturers who don’t import into the UK and on the latter point; quite understandably manufacturers and their franchise partners tend to enjoy the business model where the manufacturers produce the cars that consumers actually want to purchase, the ones who don’t are doomed to fail, and in the recent past we only have to look at the story of SAAB, in order to see how things can all go terribly wrong in the blinking of an eye.

And it is the issue of consumer demand that worries me; the most optimistic recent figure I can find for registrations of all electric cars is running at 4.2% of market share and rising, albeit slightly, and probably in-line with increased levels of production. But let’s dispel some myths right now, registrations do not equate to retail sales and we all know, (it is the industry’s dirty secret), that if we have record levels of production in one year, then surprise, surprise we WILL have record levels of registrations in that same year and until we stop fooling ourselves that all registrations are retail sales, (because they are not), we will be unable to measure demand and make the decisions required, off the back of analysing customer sentiment.

We are very early on in our journey of selling all-electric/hybrid/mild hybrid cars and as yet we are still to see just what demand there is for these cars when they return from their first period of ownership and enter the most important market of all to your continued new car success and the overall success of your dealership, the used car market.

Luckily for the industry it would appear that a “Guinea Pig” for the non-petrol and non-diesel model range has appeared on the horizon and I’m sure that everyone in the industry will be watching with interest. Volvo’s decision, (and I know many of you reading this are my connections at Volvo), to make no solely diesel and solely petrol cars from 2019 is interesting, especially in terms of the rush to market.

It is not my place to comment on the decision, it could equally turn out to be incredibly forward thinking, as much as proving challenging, but it will be interesting to see how the owners of Volvo combine the challenges of switching to all electric/hybrid/mild hybrid production model range and the effect that this policy, being delivered so sweepingly and in the near future, will have on the used car values for Volvo product, (in the short term), in the UK.

I appreciate that the UK is only one of Volvo’s markets and I have no idea how critical the UK market is to the overall success of Volvo as a global manufacturer, but one thing I do know is that strong residual values and a dealer network that is successful in the retailing of used cars, are of paramount importance to the success of any manufacturers new car aspirations and the on-going success of their franchise partners.

Those of you who read my recent post about the importance of PCP’s; http://usedcarbusinessdevelopment.blogspot.co.uk/2017/07/pcps-retaining-customers-and-growing.html and/ or who follow my blog; http://usedcarbusinessdevelopment.blogspot.co.uk/   will know my thoughts on how important PCP’s have been in the growth of the new car market and in meeting the changing purchasing habits of new car consumers, but what happens when the car returns from the first owner is critical in the on-going affordability of new cars, especially those purchased via a PCP agreement, (or any agreement with a future guaranteed residual value/balloon payment).

New car customers may be sympathetic to a view on electric and hybrid cars, but invariably they are not generally willing to pay over the odds, (on mass), to support that view. If customers are now, (in the main), using PCP’s as the financial model of car ownership, this will pose a challenge for all of you retailing ever expanding ranges of electric and hybrid models; what happens when they reach the used car market and how much are they worth?

And by this I don’t mean the manufacturer’s perspective of value or the future residual value set by the in-house finance company, I mean it’s actual market value; the price at which a business, whether that be your dealership or an independent dealer, will write out a cheque for, in order to acquire that car, confident in the knowledge that the car represents a good profit opportunity for their business.

This is normally the first moment in a cars life when the manufacturer loses control, because they can’t control the used car market like they can the new car market. For a car to be sold as a used car, it has first to be purchased by a business, either a member of their franchise dealer network or an independent dealer, who is then confident that they can sell that car and make a profit; and this only happens when the buying public perceive the car as both desirable and “Value for Money.”

The fascinating point in all this for me will be how both franchised dealer networks and the trade as a whole, (as well as the used car buying public), take to the thought of stocking, retailing and owning these all electric/hybrid/mild hybrid cars? If they don’t then residuals values are likely to plummet and/or fall short of the guaranteed future residual value required, in order to leave the new cars competitively priced in the new car market on monthly rental basis via a PCP agreement, or indeed any finance agreement involving a future guaranteed residual value.

Now the monthly rental figure for new car customers can be controlled to a certain extent by the manufacturer and their in-house finance company, if they make a decision to bridge the gap between the future residual value and the guaranteed value required, in order to remain competitive in the market, (in terms of the monthly rental/payment value), but this process does require deep pockets and cost money.

However, this is not an option available to the manufacturer in the used car market and this is the market that is over 3 times the size of the new car market in the UK and the one that is critical to the new car success of any manufacturer and their dealer network. The used car market is an unforgiving market where the preferred business model is thus;

Businesses invest in stock when it is available at a price that they perceive they can then retail with a margin that will result in them making a profit and if they don’t think the market is ready for the product, because customers are not asking for it, they will not purchase that stock and then actively try to sell it.

Just take a moment to let that statement sink in and what it means; all of you reading this post will have used car operations contained within your business(s) and on a daily basis you would quite righty expect the people you employ to run your used car operations to ensure that they are purchasing for stock, a profile of used car stock holding that they know there is a demand for at the price that they have paid, and that the price paid will ensure that the business will make its budgeted profit margin when it is retailed.

Thus my question in the heading for this post, and the answer. It will be interesting to see just how this plays out for Volvo and all the manufacturers producing all-electric/hybrid/mild hybrid cars for sale in the UK. I know the used car market and how fickle and cruel a mistress it can be, and it will take much planning, resilient approved used car programmes, adequate and cost effect manufacturer warranty programmes, as well as successful used car operations within your dealership, (and maybe some deep pockets in the short term), to support this drive to all alternatively powered cars and to ensure that demand can be created in the used car market place, alongside the demand for more traditional profiles of used car stock.

And all this will be vital, especially the ability of your used car operation, to stock and sell these cars in the volumes that are going to be required and at the retail prices required, in order to support the new car aspirations of this move to all electric/hybrid/mild hybrid production. And complicating matters for manufacturers and yourselves as franchise partners, is the fact that the used car business is very different to the new car business; yes at its core it involves the selling of cars in order to be successful, but operationally it is a different animal and requires different skills-sets from those required for success in the new car market.

Luckily help is available and if this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.

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. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com  or Malcolm Thomas at mgt@autoformance.com

Alternatively please feel free to call us on 0345 057 3177.

For more information about our services please visit our website at www.autoformance.com

Andrew Banning.
Used Car Business Development Director.