Hyundai Dealer Thrives in Tough Market with Solid CPO Sales, Tight Inventory Control, Strong ROI
FORT MYERS, Fla. — "We're trying to do more with less." That's the motto by which O'Brien Hyundai has thrived, as of late, as the auto environment and a downtrodden economy continue to present challenges, said the store's general manager, Gary Matern.
"That's what most manufacturers and businesses are trying to do," he told Auto Remarketing in a recent interview. "Trying to get the most return-on-investment with less resources than we had a few years ago."
O'Brien Hyundai is situated in Fort Myers, Fla., which Matern said has had one of the highest per capita home foreclosure rates in the country. In fact, a recent report by RealtyTrac — an online foreclosure properties marketplace — indicated that during November, Florida's Cape Coral-Fort Myers area had the fourth-highest metro foreclosure rate in the U.S.
The market's auto sales have also seen their fair share of hurdles, as well.
According to Matern, the overall area has also seen a drastic drop-off on both the new and used sides of the auto market in the last three years, similar to what many others markets across the U.S. are experiencing.
Nationally, the struggles on the new-car side may grab headlines and the attention of lawmakers, but the used-car market has challenges of its own.
Matern has seen some of these firsthand at his store. But that hasn't stopped O'Brien Hyundai from moving forward in the CPO segment.
Dealer Reaches CPO Growth Despite Market Challenges
Like many other dealers in the U.S., finding the right used inventory can be tough — Matern called it his biggest challenge — and sorting through the slim pickings of used-car loans for consumers can often come up fruitless.
Matern said his store talks to every bank possible and works with customers to get the right loan structure and terms, but finding the used-car financing can still be quite difficult.
"Getting a used car financed today is tougher than it ever has been," he said. "Credit is better today, but it's not at its peak, where it was in '05 or '06."
But in the midst of these challenges and one of the toughest auto environments in history, O'Brien Hyundai has managed to find success, particularly with its strong certified pre-owned sales.
Matern attributes this success to "our focus and our attention to it."
"We're better at it, we have more of it in stock, we're emphasizing more on CPO because the new-car business is tough as it has ever been," he added.
Overall, O'Brien Hyundai — which has one showroom for new Hyundai models and a separate one for used cars and new Mitsubishi and Subaru vehicles — sells approximately 155 new vehicles per month, and 105 used. Typically, 37 or 38 of those used sales each month are certified Hyundai models.
Matern credits his store's success in the CPO segment to "the ease and quality of the program."
"It's very easy to administer and it's a very easy process for all areas of the dealership to participate," he noted. "It's a very simple process to administer from start to end."
Typically, Matern said his store stocks 50 to 60 certified Hyundai models at a time. The top way the dealership sources CPO models is through new-car trade-ins. He emphasized that O'Brien has 12,000 customers in its database, so trading for used Hyundai's is the primary source for finding certified-worthy models.
The store also leans on off-lease volume, which Matern said is the second largest inventory stream for the dealership.
However, as of late, with the new-car sales volume softening the amount of available trade-in volume, Matern said his store has had to boost their sourcing from auctions.
"That's the toughest way to come by them because you have everyone bidding on them at one time," he said.
"Definitely, over the last 12 to 18 months, we've had to purchase more cars (from auctions) for the CPO program that we like to or are used to because of the new-car volume being down," Matern pointed out during the December interview.
And with new-car sales volumes down, there have been supply shortages on the used side, leading to the inventory acquisition challenges that many dealers like Matern face.
"The biggest challenge is procuring the inventory," he noted. "Not only (finding) inventory, but the right inventory."
Ideally, they like to go after two-, three- and four-year old vehicles, rather than one-year old units because of the price points and affordability for the consumer.
As far as the hottest certified units at his store, Matern said the dealership's best-selling models "just follow the Hyundai line," specifically citing the Santa Fe, Sonata, Tucson and Elantra.
Emphasizing Turn Rates, ROI
Moving on, when asked to give the best advice for dealers for thriving in today's auto environment, Matern strongly stressed the importance of return on investments and establishing a quick turn rate.
To accomplish this, O'Brien Hyundai keeps a "very tight inventory" on the used-car side, stocking 35 to 40 days supply of used units and pushing to turn that inventory in the same time frame.
"Whether it's new car or used cars … the most important thing today is return on investment … how many times a year can you turn your inventory and turn it into dollars?" Matern emphasized.
"Turning that inventory and making the most profit on every (unit) is the most important thing to dealers in the country right now," he continued
He added that, like many other stores, Hyundai has also had to "re-assess" expenses.
"We're like almost every dealer … we've had to re-assess staffing levels and every expense (to ensure) that we're getting the return on investment we're looking for in every area," he continued.
Spreading the CPO Message
As most know, consumer awareness of the benefits of buying certified can be critical for dealers' success in the segment. To get the word out about what Hyundai's CPO program can offer consumers, O'Brien Hyundai does a lot of radio and TV advertising, as well as direct mail.
Matern said the central message of the certified advertising is "the peace of mind (consumers) can have."
He continued: "They can feel comfortable because we've inspected the vehicle thoroughly and because of the backing of the factory warranty."
And the salespeople certainly embrace the benefits of selling certified, as it can help put shoppers at ease with buying a used vehicle.
"We've been so successful with Hyundai as a new-car franchise, the certified comes easily because the processes are easily switched over to certified," Matern pointed out. "They're totally on board with the CPO because it's an easier sale for the customer, because it puts them at ease with the warranty."
He added that some of the efforts to spread the word about CPO come naturally, since the store is the 10th largest Hyundai store in the U.S.
"It's a natural, easy advantage to advertise CPO because it mirrors the warranty of the new-car so closely," Matern added.
Additionally, he indicated that the store uses JM&A Group as its service-contract provider, and it comes to the dealership to provide selling tips, as well.
Hyundai's varied model mix also helps in the specific market, Matern noted. The Fort Myers area has a wide range of demographics and interests, and Hyundai's lineup variety fits in well.
"We have a great mix of retired customers and people who are still working," Matern suggested. "Hyundai appeals to both. It presents a great quality car for very good value that appeals to the range of demographics in our area."
It likely also doesn't hurt that, nationally, Hyundai has become more of a player among the traditional larger automakers.
"The brand awareness, that's a big part of what led to its big step up in market share and penetration … It's a great quality car across all lines from Accent to Genesis. Every car (offers) great value against our competition," Matern pointed out, emphasizing that neither quality nor value alone leads to success.
You have to provide both and that is what Hyundai has done, he suggested.
"You have to have a complete package and that's what Hyundai brings to the table," he added.