Well, our last post; Developing A Successful Used Car Business; It Could Be Now Or Never, seems to have caused some debate with differing standpoints, depending on whether or not you have outperformed the new car market as a whole or not?
However the thread of our argument surrounding success in the used car market and the importance it plays in terms of securing your business moving forward, and into a market that is evolving at such a pace, (something that will not be secured solely by your level of success in the new car market), we would maintain still stands true.
You only need to look at the SMMT new car registrations figures for 2018 to see how some manufacturers and their franchised dealer networks are struggling; with as many as 10 manufacturers and their associated networks experiencing year to date decreases in new car registrations of between 20% and 75%, the dangers of not running a used car operation that is successful in retailing used cars, has never been more prevalent.
Of course we appreciate the importance of the new car market to the manufacturer and therefore, by default, to the franchised dealer, but regardless of your success today in the new car market, (due to many factors), you are going to experience downturns in new car performance; during model run outs, economic down turns etc. But this unavoidable downturn can be dramatically reduced if your business includes a successful used car operation.
Looking at the figures from the SMMT for new car registrations thus far in 2018, it is no coincidence to us that the manufacturers and their associated franchised dealer networks, experiencing the biggest year to date reductions in new car registrations, are those either not enjoying franchise dealer networks that are successful in the used car retailing arena and/or not taking the measures required to develop and support used car retailing within their franchise dealer networks.
We appreciate that at times of challenging new car trading conditions, it may seem counter intuitive to be diverting your attention to a separate part of the business, but the reality is that if you want to build successful new car trading foundations that are fit for purpose, an integral part of this process and your future success, will be a successful and profitable used car operation, and being aligned to a manufacturer with a fit for purpose approved used car programme; one that is then supporting their franchise dealer network in developing used car operations that are successful at retailing used cars.
However, some franchise owners, as well as the manufacturers they represent, just never grasp this concept, they think the new car business can stand alone and be successful in delivering growth year-in and year-out but it can’t! If you represent one of the manufacturers experiencing 20% plus declines in new car registrations during the first half of 2018, ask yourself how this can happen? What is it that makes a manufacturer and your business, (as one of the franchise partners), experience a decline in new car registrations of this magnitude and in such a short period of time?
For sure there may be reasons at the margins of this decline, model range run outs etc. but it is folly to blame substantial declines in new car sales on operational or economic factors that are at the margins of under-performance. Sometimes we have to look inwards, stop blaming the outside forces and face realities that we may wish to ignore. As the famous Arthur Conan Doyle quote from his Sherlock Holmes novels goes; “Once you eliminate the impossible, whatever remains, however improbable, must be the truth!”
And the truth is that the operational disciplines and the investment in businesses required to ensure that you have a used car operation that is successful at used car retailing, will then ensure that you do not suffer the declines in new car sales that some manufacturers, (and their associated franchised dealer networks), have experienced thus far in 2018.
I won’t go too deeply into the reasons for this in this post, (I will be covering these issues in future articles), but it should be no coincidence to anyone reading this article that the businesses that are most successful, in terms of new car sales, are also the businesses that the most successful at used car retailing. The business that is successful at used car retailing is less prone and more resilient to down turns in the new car market, and when they do come, (as they invariably do), the business with a profitable used car operation always bucks the trend; isn’t it funny how they have a knack of always succeeding in the new car market as well?
Well just take a moment to ask yourself why? Let me assure you of a couple of things; it will be nothing to do with the territory where they are based or any special preferences they get from the manufacturer. It will be how they leverage and take advantage of their successful and profitable used car operation, incorporating the associated sales and operational disciplines throughout the rest of the business, which then ensures that they are bucking any downward trends in the new car market.
And manufacturers who support this development of used car retailing strategies and have the training and initiatives in place for franchise partners to develop used car businesses, and to develop the personnel responsible for running used car operations, will be the manufacturers securing their future long term used car and new car success, both for themselves and their franchise partners.
Over the last 10 years the new car business has been in a halcyon period supported by cheap interest rates and the feeding frenzy for PCP, (as a purchasing model), with consumers. During this period the new car business has experienced some record levels of performance, but I fear that this period is now coming to an end, and what’s worse, those who didn’t keep their focus on their used car business, are going to struggle with the challenging trading conditions and inevitable down turns in new car performance coming their way. The benefits to the franchised dealer of having a professionally run and profitable used car operation, that is successful at retailing used cars, are too numerous to mention, and were covered in my last post, so can be found by following the direct link above.
The pressures on our trading model were also discussed and these threats are not going away; in a market that is both evolving and fragmenting at a dizzying pace, the time to be securing the future of your used car and new car trading model is now, before it is taken from you, (your fellow franchise partners and the manufacturer you represent), by the aggressive independent business models targeting the sector.
These threats will not be going away, with independent internet based new car supply businesses now openly targeting expansion into the used car market, we would caution that the sector, and the franchised dealer based trading model, has never been under such threat; the time for action is now and the main area of your business requiring your focus, will be your used car operation and retailing model.
In the trading conditions prevalent today it is an inconvenient truth that franchised dealers will need to build successful and profitable used car operations, if they are to grow and remain financially resilient in the evolving market conditions coming their way; and manufacturers will only be able to develop strong and resilient franchise dealer networks, those capable of supporting the new and used car aspirations, and free from high levels of manufacturer support and subsidies, if they invest in and promote the expansion of approved used car business development programmes, those that will be required to ensure that a network of successful used car operations can be built.
Unfortunately though, strong and resilient used car operations 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 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 me on 07796 260261.
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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