Although you may be struggling to immediately see the link between these two very different sides of the business, it is an inconvenient truth that effective and continual used car stock disposal techniques and procedures are at the foundations of the success of your franchise dealer partners and therefore your shared objectives for your new car business.
Having worked with many European manufacturers, written and presented used car strategy documents and run the subsequent programmes, we have seen the importance that this business discipline plays, in terms of your new car success, and unfortunately it is very hard for you as the manufacturer to control. Why? Well because it lies squarely in the hands of your franchise partners and the funding they have available to operate their businesses.
Those of you who read my previous post; Want To Grow Your New Car Business? Start With Your Used Car Business, and/or regularly follow my blog, will understand our view and understanding that long term new car success can only be built from used car success, that much is proven beyond doubt within the industry. However, for funds to be available to support and grow used car operations, (therefore supporting your shared new car objectives), these funds must not be tied up in used car stock or part exchanges for which there are no buyers.
This situation effectively starves your franchise partners of the funds required to operate effectively in the used car market, therefore support residual values and your shared new car objectives. It really is a vicious downward spiral with no “Up-Side” what so ever, and the damage that this status quo causes to your new car success in incalculable. I have lost count of the times I have visited compounds with used car stock/part exchanges stored in them that nobody knows what to do with, in order to release the funds and make them available to the business, to grow their used car operation, and therefore their new car business and their profits as a whole.
So in effect what happens in the worst case scenario is that your dealers begin to turn away business that involves a part exchange, because the funds are not available to take any associated part exchange into stock, because there is no operational process in place ensuring the continual disposal of part exchanges and/or overage used car stock and the returning of the funds associated with this stock holding, back to the business. And cash is the oxygen of business, so having no effective stock disposal procedures in place at the businesses of your franchise partners, is just as serious as them deciding to close their service departments, in terms of the overall performance of their business!
And as the manufacturer, you would never allow one of your franchise partners to close their service operation, this would be a disaster for the business and the support required to your shared new car objectives; but the lack of an effective stock disposal operation within their businesses, is just as damaging to your new car objectives, so why are franchise partners allowed to operate without this part of their business?
In the UK we now operate with the worlds’ only 24-7-365 used car stock trading market, a stock market for used cars if you like, where stock is always traded and funds returned to franchise partners, in order to re-invest those funds in their businesses and support their new car objectives. You may not like the market value at the time of disposal, but like any commodity that is traded, it is only worth as much as someone is prepared to pay, but you can always liquidate and provide the oxygen of funds to your business.
But it wasn’t always like this, the importance of used car stock and part exchange disposal has grown as the used car market has evolved, but it does lie at the very foundation of successful used car programmes in the UK. Remove this and, just like in European markets, funds would not be returned to businesses for re-investment in manufacturer approved used cars, leaving them, and the residual values of these cars, at the mercy of 3rd party businesses with no priority towards your new car objectives and the protection of your brand.
So where do you start? You take on board the importance that approved used car programmes play in your new car success and the fact that an effective stock disposal business will lie at the heart of the foundations for these two business objectives. Unfortunately though, strong and resilient used car dealer networks with effective stock disposal practices do not happen by accident, but luckily help is at hand.
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.
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