In a year when the automotive sector in the UK has seen many challenges, especially those associated with new car sales volumes, it has been interesting to see just how many more manufacturers are looking to the used car performance levels within their own networks, having grasped just how important successful used car businesses are going to be as we enter 2019 and beyond.
There is no doubt that manufacturers are correct in this assumption, whether they are trading in UK or European markets, and we will not use this article to go over the old ground of reconfirming just why successful franchised used car networks are so important to both manufacturers and their franchise partners; besides these critical business arguments have already been covered in our recent article; Want To Grow Your New Car Business? Start With Your Used Car Business as well as in many more articles that can all been found on our Used Car Business Development Blog.
Having been involved in strategic planning on behalf of many manufacturers looking to assure their future used car success over the course of the last 12 months, I thought it worthwhile discussing this subject more openly with our European based audience. Now it is true to say that the issues discussed will affect every manufacturer in different ways, but it is also true that you all face the same problems and long term planning obstacles and in our opinion, only those investing in their long term success in the used car market can now secure their futures and those of their franchise partners.
And this last point is important; I will not name names or discuss my observations from travelling the country and throughout Europe in specific detail, but from the amount of shared franchise sites I see now, some manufacturers are obviously having problems finding the investment required from the institutionalised investors and larger dealer groups, in order to run a network of independent sites, and this is not a healthy sign either for the franchise owners or the manufacturers involved.
In many cases these are the up and coming new car franchises that are perhaps dealing with the franchise network they initially secured, in order to first have a presence in European markets and developing franchise networks can, of course, be a challenge. Either way I predict that for manufacturers leading with just the new car, servicing and warranty supporting franchise model, the future will be difficult for everyone other than the already established successful new car manufacturers; many of whom though are now looking at their used car model and how they support their franchise networks in developing used car businesses.
So for those manufacturers looking to support and promote successful franchised used car dealer networks, just what is the inconvenient truth? Well in truth there are many so I have included a brief selection of the used car business development hurdles below which will hopefully help European based manufacturers to avoid the much seen short term used car strategic decisions made by manufacturers in the UK in the past, because unfortunately there is no easy answer or short cut to used car success! It is just hard work!
The Model: In terms of a process and the daily operational procedures, successful used car retailing is very much “At Odds” with your new car retailing model. It is best summed up as thus; “Taking a very large sum of someone else’s money, investing it in a depreciating asset type and dealing with people in a very small window of profit opportunity!” This is the polar opposite of the new car retailing model.
The People: As consumer behaviour has changed due to busier lives and advances in technology there has been a rush by some manufacturers, (quite understandably), to embrace technology and to use it to control more of the new car sales process. This model has proven to be successful and the profile of staff employed to fulfill this selling model is cheaper to invest in because the expertise required is not as all-embracing.
Unfortunately though the skill-sets involved in this role are very different to those of the successful used car sales professional, and the default appears to be to try and combine the 2 roles in the selling process at businesses which is doomed to fail, as a long term strategy, in terms of achieving used car growth.
The Used Car Stock Holding: The ability of any used car operation to grow is directly linked to its ability to acquire used car stock in both the correct profile and in enough numbers, (on a continual basis), to feed both the ambition and the potential. Unfortunately used car stock acquisition is now one of the most competitive, specialised and skilled roles in the industry; the harsh reality is that if you do not know how to secure your future used car stock holding, you are not going to be able to grow your used car business.
Training and Development: As European new car markets have taken advantage of both cheap interest rates and the embracing of PCP agreements by new car consumers, many manufacturers did not see the need to invest in the long term training and development of used car professionals. Many manufacturers and large dealer groups appeared to think that there would not be a need for them to train and develop used car professionals and this lack of investment and forward thinking will leave many behind the curve when it comes to building their used car businesses.
The Competition: Whilst European new car markets have been changing, in line with the points above, European used car markets have also been evolving and in reality with successful independent used car specialists and used car volume retailing businesses now common place throughout Europe, the most successful retailers of the used car product for many of you reading this article, will be independent businesses outside of your franchise dealer network.
In fact for some premium, specialised and supercar manufacturers, the retailing and pricing of your product in the used car market is now out of your hands and in the hands of very professional and successful independent specialists, who are setting residual values and the bar of expectancy with the customers then purchasing your product, once it has entered the used car market. For many of you reading this article, there is years of much specialised hard work required to redress this.
Short Term Thinking: This is a “Double Edged Sword” for many of you reading this article and the question I would ask of you all, as well as the large dealer groups investing in your franchises is this; “Are You Dressing Your Business or Building Your Business?” This is important and I add the caveat that it is not for me to tell you what to do but in terms of the development of your used car business, there is a huge difference between the two. If all you are concerned about is a short term increase in performance, (for whatever reason), then that is a totally different approach to that of investing in the foundations of your business in order to ensure your continued future used car success. Unfortunately this is a longer and far more involved journey of used car business development, but the only one that will secure your long term success.
However, all is not lost because there are many advantages that can be leveraged, that only you and your franchise dealer networks can access, but it will require some long term strategic planning on behalf of you and your franchise dealer networks.
In the trading conditions of today it is an inconvenient truth that manufacturers will only be able to develop strong and resilient franchise dealer networks, those capable of supporting their 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 dealer networks 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 me on 0044 7796 260261.
For more information about our services please visit our website at www.autoformance.com.
Andrew Banning.
Used Car Business Development Director.
In a year when the sector has seen many challenges, especially those associated with new car sales volumes, it has been interesting to see just how many more manufacturers are looking to the used car performance levels within their own networks, having grasped just how important successful used car businesses are going to be as we enter 2019 and beyond.
There is no doubt that manufacturers are correct in this assumption and we will not use this article to go over the old ground of reconfirming just why successful franchised used car networks are so important to both manufacturers and their franchise partners; besides these critical business arguments have already been covered in our recent article; Want To Grow Your New Car Business? Never Take Your Eye Off Your Used Car Business as well as in many more articles that can all been found on our Used Car Business Development Blog.
Having been involved in strategic planning on behalf of many manufacturers looking to assure their future used car success over the course of the last 12 months, I thought it worthwhile discussing this subject more openly with our manufacturer based audience. Now it is true to say that the issues discussed will affect every manufacturer in different ways, but it is also true that you all face the same problems and long term planning obstacles and in our opinion, only those investing in their long term success in the used car market can now secure their futures and those of their franchise partners.
And this last point is important; I will not name names or discuss my observations from travelling the country and throughout Europe in specific detail, but from the amount of shared franchise sites I see now, some manufacturers are obviously having problems finding the investment required from the institutionalised investors and larger dealer groups, in order to run a network of independent sites, and this is not a healthy sign either for the franchise owners or the manufacturers involved.
In many cases these are the up and coming new car franchises that are perhaps dealing with the franchise network they initially secured, in order to first have a presence in the UK market and developing franchise networks can, of course, be a challenge. Either way I predict that for manufacturers leading with just the new car, servicing and warranty supporting franchise model, the future will be difficult for everyone other than the already established successful new car manufacturers; many of whom though are now looking at their used car model and how they support their franchise networks in developing used car businesses.
So for those manufacturers looking to support and promote successful franchised used car dealer networks, just what is the inconvenient truth? Well in truth there are many so I have included a brief selection of the used car business development hurdles below which will hopefully help people to avoid the much seen short term used car strategic decisions of the past, being made again, because unfortunately there is no easy answer or short cut to used car success! It is just hard work!
The Model: In terms of a process and the daily operational procedures, successful used car retailing is very much “At Odds” with new car retailing. It is best summed up as thus; “Taking a very large sum of someone else’s money, investing it in a depreciating asset type and dealing with people in a very small window of profit opportunity!” This is the polar opposite of the new car retailing model.
The People: As consumer behaviour has changed due to busier lives and advances in technology there has been a rush by some manufacturers, (quite understandably), to embrace technology and to use it to control more of the new car sales process. This model has proven to be successful and the profile of staff employed to fulfill this selling model is cheaper to invest in because the expertise required is not as all-embracing.
Unfortunately though the skill-sets involved in this role are very different to those of the successful used car sales professional, and the default appears to be to try and combine the 2 roles in the selling process at businesses which is doomed to fail, as a long term strategy, in terms of achieving used car growth.
The Used Car Stock Holding: The ability of any used car operation to grow is directly linked to its ability to acquire used car stock in both the correct profile and in enough numbers, (on a continual basis), to feed both the ambition and the potential. Unfortunately used car stock acquisition is now one of the most competitive, specialised and skilled roles in the industry; the harsh reality is that if you do not know how to secure your future used car stock holding, you are not going to be able to grow your used car business.
Training and Development: As the new car market has taken advantage of both cheap interest rates and the embracing of PCP agreements by new car consumers, many manufacturers no longer saw the need to invest in the long term training and development of used car professionals. Many manufacturers and large dealer groups appeared to think that there would no longer be a need for them to train and develop used car professionals and this lack of investment and forward thinking, will leave many behind the curve when it comes to building their used car businesses.
The Competition: Whilst the new car market has been changing, in line with the points above, the used car market has also been evolving and in reality with successful independent used car specialists and used car volume retailing businesses now common place throughout the country, the most successful retailers of the used car product for many of you reading this article, will be independent businesses outside of your franchise dealer network.
In fact for some premium, specialised and supercar manufacturers, the retailing and pricing of your product in the used car market is now out of your hands and in the hands of very professional and successful independent specialists, who are setting residual values and the bar of expectancy with the customers then purchasing your product, once it has entered the used car market. For many of you reading this article, there is years of much specialised hard work required to redress this.
Short Term Thinking: This is a “Double Edged Sword” for many of you reading this article and the question I would ask of you all, as well as the large dealer groups investing in your franchises is this; “Are You Dressing Your Business or Building Your Business?” This is important and I add the caveat that it is not for me to tell you what to do but in terms of the development of your used car business, there is a huge difference between the two. If all you are concerned about is a short term increase in performance, (for whatever reason), then that is a totally different approach to that of investing in the foundations of your business in order to ensure your continued future used car success. Unfortunately this is a longer and far more involved journey of used car business development, but the only one that will secure your long term success.
However, all is not lost because there are many advantages that can be leveraged, that only you and your franchise dealer networks can access, but it will require some long term strategic planning on behalf of you and your franchise dealer networks.
In the trading conditions of today it is an inconvenient truth that manufacturers will only be able to develop strong and resilient franchise dealer networks, those capable of supporting their 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 dealer networks 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 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.
In a year when the sector has seen many challenges, especially those associated with new car sales volumes, it has been interesting to see just how many more manufacturers are looking to the used car performance levels within their own networks, having grasped just how important successful used car businesses are going to be as we enter 2019 and beyond.
There is no doubt that manufacturers are correct in this assumption and we will not use this article to go over the old ground of reconfirming just why successful franchised used car networks are so important to both manufacturers and their franchise partners; besides these critical business arguments have already been covered in our recent article; Want To Grow Your New Car Business? Never Take Your Eye Off Your Used Car Business as well as in many more articles that can all been found on our Used Car Business Development Blog.
Having been involved in strategic planning on behalf of many manufacturers looking to assure their future used car success over the course of the last 12 months, what has surprised us is the amount of franchised dealers not wanting to invest in their future and aggressively enter the used car market, so I thought it worthwhile discussing this subject more openly with our franchised dealer based audience.
Now it is true to say that the issues discussed will affect every dealer group and franchised dealer network in different ways, but it is also true that you all face the same problems and long term planning obstacles and in our opinion, only those investing in their long term success in the used car market can now secure their futures and those of their fellow franchise partners.
And this last point is important; I will not name names or discuss my observations from travelling the country and throughout Europe in specific detail, but from the amount of shared franchise sites I see now, some manufacturers are obviously having problems finding the investment required from the institutionalised investors and larger dealer groups, in order to run a network of independent sites, and this is not a healthy sign either for the franchise owners or the manufacturers involved.
In many cases these are the up and coming new car franchises that are perhaps dealing with the franchise network they initially secured, in order to first have a presence in the UK market and we will be the first to agree that to find a manufacturer committed to developing used car retailing within their franchise dealer networks can also be a challenge.
Either way and as discussed in our recent article; Is Your Current Franchise Dealer Business Model Fit For Purpose we predict that for manufacturers leading with just the new car, servicing and warranty supporting franchise model, the future will be difficult for everyone other than the already established successful new car manufacturers; many of whom though are now looking at their used car model and how they support their franchise networks in developing used car businesses.
So for those manufacturers looking to support and promote successful franchised used car dealer networks, and the franchise dealers looking to take advantage of the opportunity to expand their used car operations, just what is the inconvenient truth? Well in truth there are many so I have included a brief selection of the used car business development hurdles below which will hopefully help people to avoid the much seen short term used car strategic decisions of the past, being made again, because unfortunately there is no easy answer or short cut to used car success! It is just hard work!
The Model: In terms of a process and the daily operational procedures, successful used car retailing is very much “At Odds” with new car retailing. It is best summed up as thus; “Taking a very large sum of someone else’s money, investing it in a depreciating asset type and dealing with people in a very small window of profit opportunity!” This is the polar opposite of the new car retailing model.
The People: As consumer behaviour has changed due to busier lives and advances in technology there has been a rush by some manufacturers and their franchise dealer networks, (quite understandably), to embrace technology and to use it to control more of the new car sales process. This model has proven to be successful and the profile of staff employed to fulfil this selling model is cheaper to invest in because the expertise required is not as all-embracing.
Unfortunately though the skill-sets involved in this role are very different to those of successful used car sales professionals, and the default appears to be to try and combine the 2 roles in the selling process at businesses which is doomed to fail, as a long term strategy, in terms of achieving used car growth.
The Used Car Stock Holding: The ability of any used car operation to grow is directly linked to its ability to acquire used car stock in both the correct profile and in enough numbers, (on a continual basis), to feed both the ambition and the potential. Unfortunately used car stock acquisition is now one of the most competitive, specialised and skilled roles in the industry; the harsh reality is that if you do not know how to secure your future used car stock holding, you are not going to be able to grow your used car business.
Training and Development: As the new car market has taken advantage of both cheap interest rates and the embracing of PCP agreements by new car consumers, many manufacturers, their franchise dealer networks and many dealer groups, no longer saw the need to invest in the long term training and development of used car professionals. Many of the aforementioned appeared to think that there would no longer be a need for them to train and develop used car professionals and this lack of investment and forward thinking, will leave many behind the curve when it comes to building their used car businesses.
The Competition: Whilst the new car market has been changing, in line with the points above, the used car market has also been evolving and in reality with successful independent used car specialists and used car supermarkets now common place throughout the country, the most successful retailers of the used cars and therefore your direct competition, will more than likely be the independent businesses outside of your franchise dealer network.
In fact for some premium, specialised and supercar franchise dealer networks, the retailing and pricing of your product in the used car market is now out of your hands and in the hands of very professional and successful independent specialists, who are setting residual values and the bar of expectancy with the customers then purchasing your product, once it has entered the used car market. For many of you reading this article, there is years of much specialised hard work required to redress this.
Short Term Thinking: This is a “Double Edged Sword” for many of you reading this article and the question I would ask of you all, as well as the large dealer groups investing franchise dealerships is this; “Are You Dressing Your Business or Building Your Business?” This is important and I add the caveat that it is not for us to tell you what to do, but in terms of the development of your used car business, there is a huge difference between the two. If all you are concerned about is a short term increase in performance, (for whatever reason), then that is a totally different approach to that of investing in the foundations of your business in order to ensure your continued future used car success. Unfortunately this is a longer and far more involved journey of used car business development, but the only one that will secure your long term success.
However, all is not lost because there are many advantages that can be leveraged, that only you and your franchise dealer network can access, but it will require some long term strategic planning for you, your fellow franchise dealer network and the manufacturer you represent. In the trading conditions of today it is an inconvenient truth that franchise dealerships will only be able to develop strong and resilient businesses, those capable of supporting their new and used car aspirations, and free from high levels of manufacturer support and subsidies, if they invest in and promote the expansion of their used car operations.
Unfortunately though, strong and resilient used car businesses 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 business 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.
It is my opinion that more threats to your new car and used car success exist now in the UK market than have ever existed; and I speak as someone who has been working in the Automotive Sector since 1989. Like many retail sectors, advances in technology have made it possible for technical entrepreneurs to target our established market and change customer purchasing behaviour. The advent of the internet, tablets and smart phones has changed consumer behaviour and I really worry where this will end, especially for manufacturers and even more so for their franchised dealer networks.
These tech businesses are targeting various stages of the new and used car supply process and building them into independent and powerful businesses which threaten the status quo, because they are undermining the status and the role of the franchised dealership, when it comes to purchasing a new or used car, because in the eyes on the consumer, the franchise dealership is no longer required to be the “1 Stop Shop” when it comes to purchasing their new or used car.
Many of you who know me, know that we also post similar articles to these in the European markets and I was caused to reflect on how our industry is changing in the UK, to warn against the migration of these third party businesses into Continental European markets, as used car markets there continue to grow, and once I had finished the article I knew it had to be sent to our UK contacts base.
I will start with what could end up being the worst case scenario, but where I generally think the sector, as a whole, is heading and then leave you all to ponder, because left unchecked we could be well on our way to this trading environment, which may suit some of you, but I caution; ultimately the direction of travel in the market is going to leave future residual values in the hands of third party independent businesses and more than likely increase the cost of new car ownership, thus threatening your new car aspirations and your business as a whole.
In saying this I do so asking you to remember that the customer is the key to all our success and the customer is having his or her behaviour changed when it comes to purchasing and now servicing their car. We live in a world where 3rd party independent businesses advertise on national TV to purchase their current car, so the franchised dealer network is no longer required in the disposal of their current car, in fact in many cases it is not even seen as the specialist services provider in this process! But even more threateningly, we now have internet based new car suppliers running regular national TV advertising campaigns, advising customers that they can supply their new car for a cheaper price than a traditional franchised dealer.
Now it doesn’t really matter what we as industry insiders think about these companies, only what the customer thinks, because theirs is the only opinion that matters and the more that consumers use these companies, the less control you have over the customer and therefore your future success. So in the UK, you could argue that at the moment the Automotive sector looks like this; in some of our largest conurbations the largest and most successful used car retailers are independent businesses, (with the numbers only increasing), the number of part exchanges at franchise dealer networks is decreasing due to third party electronic purchasing platforms, and new car pricing is well on the way to being set by independent third party internet based companies!
It is not for me to tell anyone reading this post how to run their business and if this is the new and used car supply model that you want to run in the UK, then I will be first to respect your decision and mention it no more. However if you don’t, well with the trading environment becoming more challenging there is much to consider, if manufacturers and their franchised dealer networks are to stop these independent businesses becoming more powerful, therefore undermining their businesses and reducing their future profits.
The first place to start, in terms of dealing with these threats head on and protecting your individual business? Well that will be the effectiveness of your used car operation, and those of your franchised dealer network partners, in supporting effective and fit for purpose manufacturer approved used programmes. Those that are successful in retailing used car stock in the volumes required to increase profits, retain customers and protect future new car residual values, thus ensuring your future new car success.
Only then will you individually have a used car operation capable of retailing approved used cars in the volumes required to dispose of the increased number of cars returning from PCP agreements, thus avoiding the need to dispose of this stock via independent used car retailers, which will only continue to undermine your own business and those of your franchise partners, as well as threatening future residual values and the cost of ownership for new cars, and all that that entails.
If you don’t grasp the unique opportunity that the used car business offers franchised dealer networks, then there is a danger that the industry continues down its current path, where some elements of the new car purchasing and servicing process are now being targeted by third partner technology entrepreneurs, the likes of We Buy Any Car and Carwow, to name just a few. This is dangerous, as your franchised dealership is now not being seen as a “1 Stop Shop” by customers, therefore you are losing control over the customer, because these businesses are reacting to changes in consumer behaviour and becoming very powerful in your market place; something I have covered in my previous articles below;
Internet New Car Sales 2, Judgement Day!
“Wow An Internet Company Got Me Over £5,000:00 Off My New Car!”
On top of this there is a danger, (in a world where customers have immediate market information available on their smart phones regarding the cheapest price to supply their new car and then to service it once the warranty and any servicing pack has expired), that you will have a business trading in an environment where you have lost control over new car pricing and therefore margin retention, as well as the lucrative servicing market once the warranty and servicing packages have expired.
If you don’t see the danger in this situation, just run your budgets again on this basis and decide whether or not you would be rushing to invest in a business with these sorts of returns? The only advantage you have is in control of the new car vehicle park when it returns from the first period of ownership and that can be pivotal in the process building used car operations that are successful at retailing used cars and therefore supporting your business and the manufacturer you represent.
This will result in a more resilient, profitable and therefore successful business which will also become more successful at retailing new cars as a whole, and therefore less likely to make unsold new car stock available to the independent new car retailers, (the likes of which I have mentioned), who will only continue to undermine your new car business and all that you are trying to achieve.
Unfortunately though strong, resilient and successful 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.
As European used car markets continue to evolve and new car markets become more challenging and fragmenting, I thought it worthwhile to send our European contacts base the most recent article sent to your counterparts based in the UK. I want to send this because as used car markets continue to grow this will change the dynamic in the market as a whole, especially for new car sales, so therefore I thought you might find the article below interesting?
Not on the basis that it couldn’t happen to you but because of the fact that it should serve as a warning of the challenges that some European manufacturers are likely to face in the not too distant future, and how this will present a totally different set of trading challenges to European Manufacturers, the answers to which will lie in unfamiliar parts of your current trading model. Hopefully it will leave you forewarned and with the time to prepare for the likely trading challenges ahead.
One of the issues I wanted to explore is the potential for increasing amounts of stock returning to dealerships and manufacturer owned finance houses, (that were originally sold on a PCP agreement), where the actual market values are less than the guaranteed future values agreed when the car was sold. Now this unfortunate situation can always happen, but it is what happens at this stage that can dramatically affect future new car residual values and thus the cost of new car ownership, especially if it begins to happen in larger volumes.
Now future residual values are actually being targeted and threatened on many fronts; don’t think for one moment that the listing of your new car product on the websites of independent “E-Tailers” is helping the cause of strong residual values at all. Some of the discounts shown on these websites are mind boggling and terribly damaging to the perception of the brands associated, and just as threatening as this, is how these businesses are continuing to manipulate and change customer purchasing habits.
But for now, let’s return to the original discussion point of cars returning when PCP’s have come to an end, because the long term strategy for these cars will be crucial to future residual values and the cost of new car ownership. It is important to remember that current statistics indicate that approximately 85% of new and used cars are sold using the PCP finance model so how this stock holding is manged, upon returning to your franchise dealer network, is going to influence the cost of new car ownership, and therefore your new car success, for years to come.
Now not only does this stock represent an opportunity to supply your franchise dealer network with a supply of retail used car stock, If you are also supported by a network of franchise partners who are successful retailers of used cars, then you have a network of businesses with a shared objective to work towards, where deals can be done, incentives put in place, and you can trade your way out of these challenges by retailing the stock concerned; therefore retaining more customers and actually increasing the overall bottom line for both yourself, (as the manufacturer), and your franchise partners, whilst protecting future residual values and securing your on-going new car success.
However, if you are not supported by a dealer network successful in retailing used cars, well then you have some problems and there is a danger then that future residual values are out of your control, and let me explain why. Every car has a value and a there is a customer for every car, provided of course that the car is priced correctly within the market place; so let’s focus on what happens to used car stock, when it is not retailed via your franchised dealer network, and the threats that then poses to your future new car success.
Well at this stage it still has to be disposed of and the money concerned returned to the business, if on-going financial liquidity is to be assured, and in the UK we are lucky because we operate the world’s only 24-7-365 trading environment for used car stock; a stock market for cars if you like. We may not like the price we are offered, but unlike other worldwide used car markets, stock can always be disposed of and funds returned to the businesses concerned.
So what’s the problem I here you say? Well the problem lies within the market dynamics at play here and what then happens to that stock when it is disposed of outside of your franchised dealer network. For the funds to be returned, someone has to purchase the stock concerned and the people acquiring this stock are more than likely to then use that stock holding to undermine your franchise partners and the future residual values of your new car product, in fact everything you as a business hold dear.
This stock is not being purchased by a charitable organisation, it is being purchased by another business, the owner of which will, in all likelihood, have a far greater understanding of the global used car business than maybe you or your franchise partners, because retailing used cars is all the business does, and because it does it on a massive scale across the whole of the market.
This stock will end up at an independent specialist, who will be in direct competition with your franchise partners. So you can end up in a situation where valuable stock is sold and then being advertised for sale at a business in direct competition with one of your franchise partners; so in effect you haven’t got rid of the problem, you’ve created many more because this business is now undermining your franchise partners and taking customers from their businesses.
On top of this, the situation will also be undermining and, in all likelihood, be reducing the residual values of your own product, thus increasing the cost of new car ownership and undermining your future new car performance as well; why? Well for the independent specialist to be a successful business, invariably they have to offer the same stock for sale at a lower price than similar cars priced under your approved used car programme, at the businesses of your franchise partners; but to be able to do this they have to buy at a lower price, thus driving down actual used car values, therefore future residual values over the medium to long term.
If you don’t believe me, but want to get an idea of the size of the threat these organisations represent, I would recommend that every senior professional, (whether dealer based or manufacturer based), who has a responsibility to the future sales success of your brand, goes to visit one of these organisations in the guise of a potential customer. And I don’t mean your local budget car supplier, I mean one of the new used car specialists and supermarkets that are springing up around the country.
Just walk around the site, look at the breadth of product available for sale and the opportunity it presents; basically a customer looking at a car on a specific budget or as a genre of car, need now only visit one site to see the majority of stock on offer for sale within the local market, and guess what, with time at a premium in busy lives and the way technology is changing purchasing habits, especially in regard to price and value driven purchases, this is exactly what customers do.
Now if you make the time to do this you will leave with many questions but also having learnt a lot; you may even recognise some customers that you have seen visiting the businesses of your franchise partners, but if you are honest, you are unlikely to leave unimpressed. They may not represent what you consider “The Brand” and you may be tempted to look down a little on these businesses, but they are selling thousands of used cars a year, so by default they are doing something right, and the fact that they are will have a direct effect on your new car success, because they are becoming more representative of the true stock market of car values because they will purchase anything, providing there is consumer demand and there is a profit available. Perhaps the time to really worry is when they are not purchasing your used car product?
So as a manufacturer, what is the answer to the challenges of building effective and successful used car programmes for franchise dealer networks? Well the answer to this question is that it will take a standardised and fit for purpose approved used car programme aligned with the ability to deliver the support required to your franchised dealer networks, in order to ensure you develop the used car network capable of trading effectively and retailing the volume of used car stock required, (at the prices required), to support residual values and your new car aspirations, whilst also ensuring that you then enjoy the solid foundations of a financially resilient franchised dealer network that is both capable and successful at retailing used cars and therefore supporting your future new car objectives, but this of course does not happen overnight.
If you don’t there is a danger that the industry continues down its current path where some elements of the new car purchasing process are now being targeted by third partner technology entrepreneurs, the likes of We Buy Any Car and Carwow, to name just a few. This is dangerous, as your franchise networks are now not being seen as a “1 Stop Shop” by customers, therefore you are losing control over the customer, because these businesses are reacting to changes in consumer behaviour and becoming very powerful in your market place; something I have covered in my previous articles below;
Internet New Car Sales 2, Judgement Day!
“Wow An Internet Company Got Me Over 10,000:00 Euros Off My New Car!”
On top of this there is a danger, (in a world where customers have immediate market information available on their smart phones regarding the cheapest price to supply their new car and then to service it once the warranty and any servicing pack has expired), that you will have to build a franchised dealer network asking institutions and private investors to invest large sums of money in a business where you have lost control over new car pricing and margin retention, as well as the lucrative servicing market once the warranty and servicing packages have expired.
If you don’t see the danger in this just run the figures through your dealer development programme business calculators and see whether or not you would be rushing to invest in a business with these sorts of returns? The only advantage you have is in control of the new vehicle park when it returns from the first period of ownership and that can be pivotal in the process building franchise dealer networks that are successful at retailing used cars and therefore supporting you as the manufacturer.
Sadly though all this will not be achieved overnight but luckily help is available. 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 me on 0044 7796 260261.
For more information about our services please visit our website at www.autoformance.com.
Andrew Banning.
Used Car Business Development Director.
As we all enter a more challenging and fragmenting new car environment, one of the issues I wanted to explore is the potential for increasing amounts of stock returning to dealerships and manufacturer owned finance houses, (that were originally sold on a PCP agreement), where the actual market values are less than the guaranteed future values agreed when the car was sold. Now this unfortunate situation can always happen, but it is what happens at this stage that can dramatically affect future new car residual values and thus the cost of new car ownership, especially if it begins to happen in larger volumes.
Now future residual values are actually being targeted and threatened on many fronts; don’t think for one moment that the listing of your new car product on the websites of independent “E-Tailers” is helping the cause of strong residual values at all. Some of the discounts shown on these websites are mind boggling and terribly damaging to the perception of the brands associated, and just as threatening as this, is how these businesses are continuing to manipulate and change customer purchasing habits.
But for now, let’s return to the original discussion point of cars returning when PCP’s have come to an end, because the long term strategy for these cars will be crucial to future residual values and the cost of new car ownership. It is important to remember that current statistics indicate that approximately 85% of new and used cars are sold using the PCP finance model so how this stock holding is manged, upon returning to your franchise dealer network, is going to influence the cost of new car ownership, and therefore your new car success, for years to come.
Now not only does this stock represent an opportunity to supply your franchise dealer network with a supply of retail used car stock, If you are also supported by a network of franchise partners who are successful retailers of used cars, then you have a network of businesses with a shared objective to work towards, where deals can be done, incentives put in place, and you can trade your way out of these challenges by retailing the stock concerned; therefore retaining more customers and actually increasing the overall bottom line for both yourself, (as the manufacturer), and your franchise partners, whilst protecting future residual values and securing your on-going new car success.
However, if you are not supported by a dealer network successful in retailing used cars, well then you have some problems and there is a danger then that future residual values are out of your control, and let me explain why. Every car has a value and a there is a customer for every car, provided of course that the car is priced correctly within the market place; so let’s focus on what happens to used car stock, when it is not retailed via your franchised dealer network, and the threats that then poses to your future new car success.
Well at this stage it still has to be disposed of and the money concerned returned to the business, if on-going financial liquidity is to be assured, and in the UK we are lucky because we operate the world’s only 24-7-365 trading environment for used car stock; a stock market for cars if you like. We may not like the price we are offered, but unlike other worldwide used car markets, stock can always be disposed of and funds returned to the businesses concerned.
So what’s the problem I here you say? Well the problem lies within the market dynamics at play here and what then happens to that stock when it is disposed of outside of your franchised dealer network. For the funds to be returned, someone has to purchase the stock concerned and the people acquiring this stock are more than likely to then use that stock holding to undermine your franchise partners and the future residual values of your new car product, in fact everything you as a business hold dear.
This stock is not being purchased by a charitable organisation, it is being purchased by another business, the owner of which will, in all likelihood, have a far greater understanding of the global used car business than maybe you or your franchise partners, because retailing used cars is all the business does, and because it does it on a massive scale across the whole of the market.
This stock will end up at an independent specialist, who will be in direct competition with your franchise partners. So you can end up in a situation where valuable stock is sold and then being advertised for sale at a business in direct competition with one of your franchise partners; so in effect you haven’t got rid of the problem, you’ve created many more because this business is now undermining your franchise partners and taking customers from their businesses.
On top of this, the situation will also be undermining and, in all likelihood, be reducing the residual values of your own product, thus increasing the cost of new car ownership and undermining your future new car performance as well; why? Well for the independent specialist to be a successful business, invariably they have to offer the same stock for sale at a lower price than similar cars priced under your approved used car programme, at the businesses of your franchise partners; but to be able to do this they have to buy at a lower price, thus driving down actual used car values, therefore future residual values over the medium to long term.
If you don’t believe me, but want to get an idea of the size of the threat these organisations represent, I would recommend that every senior professional, (whether dealer based or manufacturer based), who has a responsibility to the future sales success of your brand, goes to visit one of these organisations in the guise of a potential customer. And I don’t mean your local budget car supplier, I mean one of the new used car specialists and supermarkets that are springing up around the country.
Just walk around the site, look at the breadth of product available for sale and the opportunity it presents; basically a customer looking at a car on a specific budget or as a genre of car, need now only visit one site to see the majority of stock on offer for sale within the local market, and guess what, with time at a premium in busy lives and the way technology is changing purchasing habits, especially in regard to price and value driven purchases, this is exactly what customers do.
Now if you make the time to do this you will leave with many questions but also having learnt a lot; you may even recognise some customers that you have seen visiting the businesses of your franchise partners, but if you are honest, you are unlikely to leave unimpressed. They may not represent what you consider “The Brand” and you may be tempted to look down a little on these businesses, but they are selling thousands of used cars a year, so by default they are doing something right, and the fact that they are will have a direct effect on your new car success, because they are becoming more representative of the true stock market of car values because they will purchase anything, providing there is consumer demand and there is a profit available. Perhaps the time to really worry is when they are not purchasing your used car product?
So as a manufacturer, what is the answer to the challenges of building effective and successful used car programmes for franchise dealer networks? Well the answer to this question is that it will take a standardised and fit for purpose approved used car programme aligned with the ability to deliver the support required to your franchised dealer networks, in order to ensure you develop the used car network capable of trading effectively and retailing the volume of used car stock required, (at the prices required), to support residual values and your new car aspirations, whilst also ensuring that you then enjoy the solid foundations of a financially resilient franchised dealer network that is both capable and successful at retailing used cars and therefore supporting your future new car objectives, but this of course does not happen overnight.
If you don’t there is a danger that the industry continues down its current path where some elements of the new car purchasing process are now being targeted by third partner technology entrepreneurs, the likes of We Buy Any Car and Carwow, to name just a few. This is dangerous, as your franchise networks are now not being seen as a “1 Stop Shop” by customers, therefore you are losing control over the customer, because these businesses are reacting to changes in consumer behaviour and becoming very powerful in your market place; something I have covered in my previous articles below;
Internet New Car Sales 2, Judgement Day!
“Wow An Internet Company Got Me Over £5,000:00 Off My New Car!”
On top of this there is a danger, (in a world where customers have immediate market information available on their smart phones regarding the cheapest price to supply their new car and then to service it once the warranty and any servicing pack has expired), that you will have to build a franchised dealer network asking institutions and private investors to invest large sums of money in a business where you have lost control over new car pricing and margin retention, as well as the lucrative servicing market once the warranty and servicing packages have expired.
If you don’t see the danger in this just run the figures through your dealer development programme business calculators and see whether or not you would be rushing to invest in a business with these sorts of returns? The only advantage you have is in control of the new vehicle park when it returns from the first period of ownership and that can be pivotal in the process building franchise dealer networks that are successful at retailing used cars and therefore supporting you as the manufacturer.
Sadly though all this will not be achieved overnight but luckily help is available. 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 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.
