With decent retail worthy stock becoming increasingly hard to find at present, dealers will inevitably be looking to extend their criteria when it comes to selling older higher mileage versions of their product. Traditionally dealers will stick to a 3-4 year old maximum with maybe a mileage threshold of 45,000 and when taking in a part-exchange which falls outside these parameters the car would typically be traded out or sent to auction where it would be snapped up by an independent dealer to make his profit on. Frustratingly for sales managers and customers alike these cars should be sold from the dealership that supplied and maintained them. With most main dealers sticking to their original plan they are immediately excluding a large percentage of potential buyers who have aspirations to buy that particular brand of car and, most importantly would like to buy from a main dealer for the associated benefits. Although they will pay a premium for that they cannot afford (or don’t want to pay for) a 2-3 year old version but would love to buy a 5 year old example. Why, in these difficult trading conditions, are more main dealers not attempting to encourage a larger number of buyers into their brand and give themselves the opportunity to capture these customers and the chance to sell more cars?
The reason is simply because main dealer labour rates and warranty costs are often prohibitive and because most dealers are run on a strictly department by department basis each line manager is only concerned with the shape of his own bottom line.
This strange situation has existed for many years.
The new and used car sales departments may sell for example 80 cars per month making them far and away the best customer for the service manager but importantly a captive one too. The sales manager often pays the same rate as a retail customer and often the work he wants done is not even prioritised. There is no doubt that the service department makes a great living off the back of their sales colleagues and therefore in some cases if a sales team are very successful and sell lots of cars then by default so are the service department. The knock on effect of this is that they do not need to work too hard to book in more external work.
When – as at present – stock is becoming rarer sales managers should look to perhaps retail that fully maintained 60,000 mile 5 year old model to fill their sales display and hopefully attract buyers with smaller budgets. The problem arises that when he sends that car to the workshop to be forecourt prepared, because of the age and mileage the estimate can often be so high that the car is then not worth the investment. For this reason the retail price would not be achievable so you might assume in situations like this that the service and sales mangers would get together and work out a compromise so that they could both make some money, gain a customer and keep the company turnover ticking, But no, often the car is traded for what it was bought in at and snapped up by a dealer that may own the whole business and therefore decide what he will have spent on the car before retailing it and having the profit which should have gone to the main dealer.
I have often heard conversations between the two protagonists which go along the lines of this;
Sales Manager: ”The estimate the technician has given me is £2,000, if that is the case we cannot do the work, put our warranty on it and sell it for a profit, so why don’t we have a deal on the work whereby you do it for £1,000 I can sell it, make £700 and we both get a profit or I can trade it and get 100% of nothing!”
Service Manager: ”The best we can do is make it £1,700 all in’’
Sales Manager: “Ok we will have to trade it then’’ – or words to that effect – meaning everybody loses except the man who buys it to sell on again. This goes on everyday at dealers up and down the country and seems incredible that companies allow the situation to continue, but when forecourts are short of cars and customers would love to buy cheaper versions it is utter madness for the egos of 2 people to stand in the way of making profits for the company and taking on a fresh customer.
Unfortunately until businesses look at paying all staff their bonuses on what the whole business makes and not just on their own departments the situation will surely continue and buyers will carry on buying from their friendly local independent dealer who will only be too happy to take their money!
Subscribe to Motor Trade Insider by Email