As much as it might be difficult to get this message across to our franchised dealer based audience during September, we thought it worthwhile returning to this subject so that once the dust has settled on the new car sales performance during September and the planning process begins in earnest for 2019, minds can turn to reviewing this year and planning for the next.
There is no doubt that it has been a particularly bruising new car market for some this year and with no immediate reason for the trading conditions to change as we go into 2019, the importance of looking at the 3 franchises making up the whole of the business has never been more important; the 3 franchises that are vital if you’re are going to secure your long term new car success and that of your business as a whole;
- The New Car Franchise.
- The Nearly New Car Franchise.
- The Used Car Franchise.
We say this because all franchise dealers are focused on the 1st franchise, the vast majority have a focus on the 2nd franchise but the 3rd? Well there is a huge disparity in the sector in terms of the support and focus that the development of successful used car businesses receives and if manufacturers and their associated franchised dealers, are going to ensure that their long term new car objectives are achieved, via a financially robust network of franchise partners, well then this is going to have to change.
As automotive professionals and the franchised dealer sector as a whole, continues to come to terms with the evolving new car retailing landscape, the importance of having a successful used car operation has rarely been so important. With the new car market place fragmenting and being attacked by entrepreneurial, aggressive internet based businesses who are looking to manipulate consumer behaviour and to control and hold to ransom vast amounts of consumer data, we would argue that the new car market may never be the same again. Not because manufacturers and their franchised dealer networks can’t compete head on with these threats, but because the purchasing behaviour of consumers has been changed and the sector, (in the main), has been caught out by the speed at which the new car trading conditions have been evolving.
As much as some manufacturers and their associated franchised dealer networks have performed above the challenging new car market conditions being experienced in 2018, your performance within the new car market can be outside of the direct control of the manufacturer and those of your franchise partners; in buoyant markets volumes of stock and pricing are set by the manufacturer, as they are in challenging markets, (when driven either by product life cycles, economic conditions or both).
And there is no doubt that there are many challenges that all manufacturers and their franchised dealer networks face in the new car market but the foundations of your long term success in the new car market are in your own hands as they lie directly in your success in the used car market.
The used car market in the UK is still over 3 times the size of the new car market and although manufacturers can aid success, unfortunately the used car business is not one that can be leveraged and controlled so much by manufacturer initiatives. It is the tertiary and potentially most profitable part of your business, but it is also the business where there is no agreed level for volumes of stock, to any specific model mix and, of course, all the stock acquired for this business will need varying levels of preparation in order to meet the stipulations set by the underwriters of the manufacturer’s warranty.
Unlike your new car business where new car allocations are invariably agreed before the calendar year begins, so as the dealer concerned you enter a trading environment with a set allocation, directly in competition with your fellow franchise partners and the new breed of internet based independent new car businesses; this is not the case for the successful used car operation.
There is no restriction on the volumes or profits that can be achieved from the successful used car operation, only those that you, (as the franchise owner/managing director), put on the business and this makes the used car operation unlimited in terms of profit, which will then automatically increase the profitability of every department within your dealership from the aftersales, finance and new car departments.
On top of this, used car stock holdings are more unique in terms of age, mileage and specification, so the hard work required to ensure the used car operation has the right profile of used car stock, the less choice the consumer has, the less pressure there is on margins and the less vulnerable to outside forces your business is. In fact the benefits to the franchised dealer that is successful in the retailing of used cars are numerous, everything from:
- Increased new car profitability.
- Increased overall profitability, resulting in a financially stronger and more resilient business.
- The ability to increase levels of part exchanges, therefore more new car business.
- The maintaining of core standards set by the manufacturer.
- Larger customer bases therefore the opportunity to take more customers on the journey from used car to new car ownership.
- Increased opportunities for repeat sales and increased levels of margin retention.
- Increased levels of customer loyalty to the business.
- The control and protection of residual values.
- More competitive financial packages and reducing costs of ownership for customers.
- More control over the new and used car vehicle park.
- Protection of the brand.
- A business that is then not vulnerable to the aggressive business models attacking the established new and used car retailing model.
However, to get to here and enjoy these benefits your business will need to embrace, and take responsibility for, the challenges presented by the used car market place and on top of all this, there is the problem of the availability of the used car professionals required at franchised dealer level, those with the skills-sets required to ensure that your used car success can be achieved.
This subject was covered in our last post; Do Successful Used Car Professionals Exist For Franchised Dealers and our advice would be to not underestimate the task involved here. We will not repeat the advice contained within the article here but for those who didn’t see it, please follow the link above to the original article on our Used Car Business Development Blog, because in the rush for genuine used car professionals, (those with the talent and skills-sets required), you don’t want to get left behind. It is ironic that the professionals you most need now, may be those most ignored in the past and, as a whole, the sector is hugely under supplied in these professionals.
For those struggling to find these professionals, (and there will be many), we sympathise because we appreciate that finding genuinely successful used car professionals is very difficult for both manufacturers and their franchised dealer networks, 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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