|The latest 2005 reports on used vehicle sales show that they are up – and will be for the next several years. Historically, a dealer’s used car business has always had the strong potential to play a significant role in the profitability of the overall store. Now, more than ever before, it can bolster a dealer’s success substantially.|
Many auto dealerships, though, are missing out on related high profits. In fact, dealers often sell at least two new vehicles for every used one. Used vehicle sales at these dealerships could easily be doubled without negatively impacting new car sales. I’m talking a true increase over and above the dealer’s current sales pace. How? By paying closer attention to “trade closing ratios” and implementing automated systems.
Consider this: every few miles, in virtually any direction of a typical new franchise store, there is an independent used vehicle dealership that is selling wholesaled vehicles to customers “lost” by the new vehicle franchise. Basically, independent used vehicle dealerships exist because of poor used vehicle sales practices of new vehicle franchises. The answer? Know your store’s “trade closing ratios” – the percentage of vehicles appraised verses vehicles actually traded. Those who don’t keep adequate tabs on this vital information are missing out on business – in both new and used car sales. Strive for a “trade closing ratio” goal of above 45 percent. This means trading for 45 percent of all vehicles appraised.
The most cost effective and efficient way to keep track of the trade closing ratio, and ensure that it is being achieved, is to use an automated system. A fully-automated process can be extremely beneficial in helping you manage your trade ratios. They also provide:
In today’s “click of a mouse” business environment, all new vehicle dealerships can realize significant and ongoing profits from used car sales. By paying attention to closing ratios and taking advantage of the benefits that an automated system provides, new vehicle dealerships can effectively manage their inventory and reap many rewards.
The latest studies show that dealers using an automated system have increased gross retail profit by 10 percent, reduced wholesale losses by 37 percent, and lessened turn time by two days. If you aren’t using an automated system, think about the impact it could have on your business.
Vol 2, Issue 10
ADESA has named 20-year industry veteran Dave Fountaine as the new general manager of its Buffalo auction.