Why are so many dealers prioritizing used inventory? Because cars, with an average price tag of over $34,000, are out of reach for many of today’s price-conscious consumers. But they still want a new-to-them vehicle.
Not surprisingly, sales of new vehicles are expected to decline through the end of the year, but used-vehicle sales are surging. In some ways, marketing and selling pre-owned vehicles is easier than with new cars. Each vehicle is unique, so competition is light.
The downside? You could end up stocking aging inventory that costs you money every day.
So how do you maximize vehicle profitability? These four tips will help you create a sound strategy.
1. Source Vehicles From Customers.
Purchasing vehicles at auction is getting expensive. You can pay almost-retail prices at an auction and still get stuck with a vehicle that needs costly repairs to be frontline ready.
It’s much more cost-effective to source vehicles from current customers using equity mining.
With this strategy, you already know the car, there are no transfer or auction fees, you’re not competing against other dealers, and you may be able to sell the customer another vehicle. That’s a true win.
A data mining tool can help you identify owners in a position of equity. When combined with thorough follow-up and a strong BDC, equity mining is proven to deliver an ROI of 10 to one — for every $1,000 spent, you’ll get $10,000 back.
Another way to acquire pre-owned vehicles? Follow what major online used-car retailers are doing. Offer free appraisals and no-obligation purchases of used vehicles.
2. Move Vehicles Fast.
The average holding cost for a vehicle is $37 a day, according to NCM Associates. It’s clear that when a vehicle sits on your lot, it doesn’t take long for your profit potential to shrink away. You need to recon fast and stay on top of aging inventory.
Streamline your reconditioning process, photography, and vehicle description page creation to get vehicles in front of customers within days. The industry standard is to sell a vehicle in 30 days or less to maintain profitability.
Use an inventory management tool to monitor your inventory. Don’t wait until a vehicle has been sitting around for 30 days to figure out why it’s not moving. Instead, look at every vehicle at the 15- and 20-day mark.
If the vehicle isn’t moving, adjust marketing or have sales staff prioritize the sale.
3. Create Compelling Marketing.
Whether you are marketing new or used inventory, you need to give consumers a reason to buy.
CPO programs vary by brand. Identify your program’s best-selling points and highlight them in your marketing and on VDPs. Sell consumers on detailed inspections, reconditioning, extended warranties and peace of mind.
A targeted marketing strategy can help you identify the best potential customers for a vehicle and send personalized offers or messages.
4. Nurture Your Leads.
The pre-owned sales cycle is generally shorter than new, but following up on leads is still critical.
Look at daily sales activities in your CRM, including appointments set, outbound calls, connected calls, length of calls, emails, and texts.
Are your salespeople offering more than one pre-owned option in their replies? How many times have they called the prospect?
Remember: It takes an average of five tries to reach someone on the phone. Hold your sales team accountable for making and logging the attempts.
When you start to prioritize your pre-owned profits, remember to source vehicles from customers, move cars quickly, create compelling marketing, and nurture your leads. These four strategies are key to maximizing your profits while making both you and your customers happy.
Bill Wittenmyer is vice president of sales, layered apps, and competitive accounts at CDK Global. Contact him at [email protected]