Ah, new-car smell.

Not to be knocked, but certainly something many consumers are willing to forego to save thousands of dollars on their next vehicle purchase. There is no arguing with the benefits of used vehicles, especially when just about every dealer offers used or pre-owned vehicles (depending on your OEM’s nomenclature, or how up-market you position yourself as an independent).

In most income brackets, there is no longer a stigma attached to purchasing a used vehicle, nor is there any shame to be had in offering them at even the high end of the dealership spectrum.

While used-vehicle sales is a growing segment, there is not even growth across the market. There are (without question) overachievers and under-performers, and the fault line is not location, name plate or square footage. The key determiners of success in used-vehicle sales today lie in the areas of purchasing, merchandising and financial services sales.

The down side to this is that no matter how established your location or how much floor line you have at the bank, you are not guaranteed a profitable used-car department.

The upside is that it’s anybody’s game: with careful strategy and dedicated process, you can build a better used-car business that adds to your dealership’s bottom line and generates not only ROI, but also transactional sales growth that can increase your employees’ income while building your local market area total reach.

As most us plan for next year’s business, here are some guidelines to planning your used-car business, creating a used-car point-of-purchase to point-of-sale chain, and marketing tips to make your used vehicles stand out from the pack.

Plan your Purchasing

Gone are the days when a hundred dealers stood in an auction lane and just stuck their hand up in the air. While the era of unplanned purchasing was a heady time that favored those with gut (instinct) and guts (courage to take risks), the new purchasing climate means that many dealers are using stocking tools and spreadsheets to optimize the big picture of their purchases.

vAuto and Dealertrack Technologies’ AAX bring science to the lanes, and the market reflexivity of such tools helps to break down walls to show dealers what is hot or not, in terms of brand and models that move and make money.

Simply analyzing your own inventory, as in, what you sold and how fast and with how much gross, is only a small piece of the picture, because you can’t sell what you don’t stock. The dealer down the road might be making a mint turning a row of 4- to-5-year-old minivans, and if all you stock are the cherries from your new-car department’s trades, you lose the chance to get in on the demand and the dollars.

When setting your sales projections, be realistic about how many units you can sell based on how many units you can stock and how fast you get those vehicles to market, sold, and down the road.

With the continued volatility in used-vehicle wholesale values, the only thing certain is that you don’t have 100 of anything: spread your investment over segments that sell in your market, and don’t be afraid to stock units unlike what you’ve sold in the past in order to broaden your selection and beef up your rows.

Market, To Market

If its not online, its not really for sale. There are two main types of advertising: transactional and relational, and both of those take place, more often than any other media source today, online. Use your Web properties to provide the “why” for consumers who are comparing your stock unit to another dealer’s car, and above all else, worry about getting the car online in all its glory: pictures, price, pedigree.

If it takes you 12 days from the date of purchase to get a car online, your goal of a 30- or 40-day turn becomes a pipe dream. If it takes you four days to secure an approval, then another three days to get the car delivery ready, that 30-day turn is more like a tick-tock timer giving you 11 days to marry your car to a buyer.

Scrutinize your Web listing practices, and look for areas to tighten up your timelines. Ask your website provider if you can have more frequent capture visits, or if you can self-load vehicles.

Find out exactly when your data is pushed from your database to the portals; some inventory management systems let you stipulate how frequently you push and edit data, and it may be that all that separating you from live time data online is a few dollars or even a simple request.

As for the relational stuff, build yourself a gold mine of good quality content. No Google algorithm change yet has penalized high quality, original content that is updated at modest intervals. Use this forum to showcase your successes, to humanize your staff and to build integrity in the products you offer on your lot and in your service and parts departments, as well as your financial services office.

A Three-Legged Stool

You stand behind the vehicles you sell, and the same needs to happen with the products in your business office. Today’s dealership can’t survive on car gross alone, and more than ever, service department and business office products are making up for the narrowing gap between wholesale and retail.

To be profitable, we need to look at car purchasing as an ownership experience, much the way home builders have relied upon the cost of upgrades to offset the fierce competition on the “starting from” price in recent years.

Let me say it once and for all: There is no shame in making money in the business office.

There are partners with premiere products which actually add value and improve people’s ownership experience. You don’t have to offer things you don’t believe in, but if you sell it, you better become a believer, otherwise your staff won’t believe it, and neither will your customers. For almost every friend who has bought a used vehicle from me, I have famously said, “You’re taking the warranty, otherwise, in two years, you and I may not be friends.”

That’s how strongly I believe in extended warranty, and I’ve said the same to a 20-something family member about GAP and job loss protection.

If you’re projecting a gross sales figure based on front end per-car profit alone, you are missing the boat on possibly half of your potential per unit gross, in the business office. $3,200 — or $4,000 — per car is still a reality with a strong business office.

The other benefits are that protected customers become happy repeat customers, and owners with warranty keep coming back and ultimately bring you trades which may be in better mechanical shape, lowering your recon costs down the road.

Success in used cars is attainable, but involves a lot more strategy than sticking trades in a row out the back. It’s time for this important market segment to be acknowledged as a business unto its own, and the dealers who take the time to learn it well will reap the rewards. Happy selling! 

Cathie Clark is the director of Automotive Insider Consulting.