When the trade-ins aren’t coming in, how do you find profit?
With trade-in inventory dropping 30-40% over the last few years, dealers are finding it difficult to squeeze profit from their preowned centers. In order to be strong, they need to be investing in purchase units at the right price and turn them fast. Lease turn-in’s are expected to be the main stock in the next few years and, as car sharing and low wages are effecting new car sales, more trade-ins are unlikely.
Manufacturers just don’t get it
Today’s consumers will be looking for low cost inventory- that is price points below 20k- and preowned is likely where they will be searching. But, manufacturers don’t seem to be understanding this and are pricing new cars high to cover their costs on adding expensive high tech features to the newest models. They don’t understand their customer base, so they are creating a mismatch in the market between what they are producing and what the consumer is buying. In order to grab market share, you will need a good source of used cars to build your inventory.
Today’s savvy auto consumer
Customers aren’t walking onto lots unaware any more. They want to shop from the comfort of their homes. This means they likely have their eye on a few cars they are interested in and they are educated about pricing. Even previously happy customers will shop online before showing up at a dealership they already know, like and trust.
What does this mean for you? It means two things. First, you need to be showing up in search engines when they are looking, and second, your salespeople need to have the skills to engage these more educated shoppers.
Capturing the Trade-in
When the consumer shows up, they know the value of their trade-in, and if your Sales Manager gives a low ball offer, the customer will walk. Successful dealers know the ACV and appraise the trade-in aggressively to get the customer to turn in the trade- but this should only be done on the cars that will resell. Don’t lock up cash by purchasing trades for the sake of inventory. Buying the wrong inventory will result in frozen capital.
If you understand today’s consumer, you will buy the right car at the right time. This may mean you will buy the trade in a bit higher, but you know it will turn over
QCEP understands the auto industry and we are here to help you find the gaps that are causing loss and provide the skills training needed to maximize profits. If you are needing someone to come beside you to fill those gaps in where you are versus where you want to be, give us a call today.