The new car market, like many other markets, is evolving at a frightening pace but we also predict that the pace of change will never be this slow again. Now this subject is a post in itself, one that we don’t want to get into now; besides our core area of expertise is the used car market, a market which becoming more detached from the new car market by the day, and this is creating some operational challenges for some manufacturers and their franchised dealer networks.
However, this disconnect between the new car and used car markets also presents a “Once in a Lifetime” opportunity for franchised dealer networks; sadly though we predict that few will grasp this opportunity. You may wonder what would lead us to say this, but it is genuine feedback from the used car business development audits that we carried out last year. Many reading this article, those currently running a “Standard” used car business, (i.e. the reactionary used car business that disposes of ex demos and part exchanges), will be in love with idea of having a successful used car operation, but few will take the positive steps to educate themselves and then embrace the hard work involved.
This analysis has led to the quote in the title of this post, an actual quote from a Dealer Principal running a prestige brand franchised dealership. During our synopsis at the end of our used car business development audit we thought there was much to be positive about, in terms of growing a profitable used car business, but as we discussed the opportunity on their doorstep, (but also the work required to take advantage of this opportunity), that was when we heard him say; “Look the last thing I need is a successful used car operation upsetting the new car business!” So in essence the very last thing this thing the Dealer Principal at this multi million pound facility was going to countenance, was building their used car business!
As surprising as this quote will be to many, we were not surprised; not because of the individual involved but because of the culture being bred in some franchised dealer networks, especially those owned by PLC’s and the big groups; and because of the way these groups reward their staff and the “Do as we say, not as we do” management style. Now in the past, in the days when the new and used car businesses were more aligned with each other, businesses could get away with generating this environment, but not now.
And this now presents those smaller businesses, the owner run and small independent businesses run by small groups contained within franchised dealer networks, with an opportunity unlike any other, because the bigger groups, those perhaps with the huge new car allocations, they are not looking at the used car opportunity. No they are still peddling furiously to maintain the balance between leveraging their debt model against their new car business and real estate model, so they are rather preoccupied!
Unfortunately though there will some challenges when it comes to the vital education process required, in order to be able to take advantage of the used car opportunity. In the main, manufacturers in the UK gave up on the used car business over a decade ago; they never really enjoyed the business so when the new car business was “Saved” by the PCP agreement and the cheap interest rates that followed the financial crisis, well they then embraced the opportunity to walk away from the used car business forever!
So those franchised partners looking for used car business development expertise from their parent manufacturer will struggle to find it. We have been in meetings with many and they just don’t want to embrace the hard work either; for them it is just a box that needs to be ticked, so they can abstain from the responsibility. So at best you might get access to the “One Trick Pony Solution” being offered by some manufacturers, if anything at all. This will invariably consist of a day in a room with someone and their whiteboard, someone by the way who has probably never built a successful used car business, because if they had, they would know that “Sticking Plaster” solutions are not the answer to building successful used car businesses.
If you really could build a successful used car business after one day in a room with someone and their whiteboard, then everyone would have a successful used car business, because it would be that easy and the person delivering this content would be so successful that they would own a private island next to Richard Branson’s.
As with anything in life, the difference between those succeeding and those who are not, will be between those who invest in their education and those who don’t. Over the last decade, the decade when manufacturers and the PLC’s owning vast swathes of franchise dealer networks in the UK, became mainly new car centric in their business offering, others have moved the used car retailing game on, way beyond the experience and understanding of many.
We have sat in many first meetings with manufacturers and those running businesses owned by the big PLC’s, many of whom we have agreed with that we would not be a good fit moving forward. Not because we can’t help; no on contrary, only because those in the room with us will not accept what is required. Many manufacturers and the PLC’s owning vast swathes of franchise dealer networks in the UK are still looking at the used car opportunity with mind-sets that are 20 years old; all too often they think there is one simple answer, invariably something technology driven, (“The Emperor’s New Clothes” as we like to call these), or a single focus on one operational issue.
In reality, (and this in genuine used car market place feedback from the forensic used car business development audits we carried out over the years), there is no doubt that every franchised dealership in the UK could grow a successful used car business. For many, all they have to do is address the following operational and used car business development investment requirements;
- Building your entire used car retailing team.
- Implementing your on-going used car stock acquisition initiatives linked to both your proven used car stock profile and your retail used car sales objectives.
- Building the financial model and demonstrating the utilisation of the increased level of funding to be employed to your increased level of used car stock, in order to secure the funding required.
- Enhancing all the operational areas of the entire business required to ensure that all used cars can be retailed in the 60 day investment window of profit opportunity.
- Understanding and flexing your business to take account of the cyclical demand of the used car market.
- Designing and delivering your complete used car advertising and marketing campaign.
- Developing your used car personnel development and training strategy, in order to secure your used car succession plan.
- Developing the used car enquiry management initiatives required to maximise used car opportunities to do business; including developing electronic engagement into used car sales.
- Building your used car preparation model to ensure that all used cars are fully prepared and on display within 3 days of arriving on site; 5 days if minor bodywork is required.
- Fully understanding the principal that in the first 30 days you are retailing for profit and that thereafter you are retailing out of problems or at a loss; and therefore what that means, in terms of setting your business up operationally, if you are to succeed.
So, as much as there is much to do, there is also an opportunity for many to secure their future. However many will just not be prepared to take on what will be involved, in order to develop their used car business. As much as this creates a tremendous opportunity for the privately owned and smaller franchised dealer groups, the most important decision that they will make is in who they choose as their used car business development partners and mentors; as covered in our recent article; Used Car Business Development And The Best Piece Of Advice I Ever Received!
In this article we explored the importance of realising that your education in the used car business is no different to education in any other business, and the importance of remembering the following at all times;
You Will Pay For Your Education One Way Or The Other; Either From Your Mistakes Or As An Important Investment In Yourself,,,, It Is Your Choice!,,,,,
Investing in an opportunity when you feel you lack the knowledge and experience in order to succeed can be daunting, especially when there is little help available from parent manufacturers. Luckily help is available; 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 and their franchised dealer networks. More importantly, we are still trading and running used car businesses in specialised used car markets ourselves.
Those wishing to explore our full range of used car business development and personnel training services, and how we can help you to make more money from retailing used cars, need only contact Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com in the first instance, in order to arrange a no obligation exploratory discussion.
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.
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