Study: Used Car Profit Gap Closing

CLEARWATER, Fla. — The gross margin gap between the sale of used and new vehicles dropped 21% in 2017. And that's despite the share of used-car sales rising from 40.2% in 2016 to 40.7% last year, according to a new report.

The report, “The Impact of Used Car Sales on Your Service Drive," was released today by marketing, sales and service solutions provider AutoLoop LLC. It summarizes the company’s analysis of used-vehicle sales data from more than 250 franchised dealerships.

“This is both good and bad news for auto dealers,” said Doug Van Sach, AutoLoop’s vice president of analytics and data services. “The good news is we’re seeing increased opportunities to sell more vehicles. The bad news is that the gap between new and used profit is shrinking as more off-lease vehicles flood the market.”

“If this trend continues,” Van Sach explained, “dealers will see their service business gradually erode as fewer customers make the journey from the showroom to the service drive.”

Used owners are 50% less likely to visit the dealer for maintenance and repairs, and they are 25% less likely to return to a dealer to buy another car. Because of this, dealers who rely solely on a manufacturer’s retention marketing program are particularly vulnerable to losing used-vehicle service business, as many of these programs ignore used-vehicle owners.

One possible solution? Van Sach suggests dealers develop a separate customer retention and marketing program for their used vehicle customers. “Make used customers aware of your service value proposition, and offer them targeted service specials based on their unique needs.”

Visit AutoLoop at Booth 5038C at the NADA convention in Las Vegas.