The pressure on dealers to source retail worthy cars at 3 years and over and still retain a sensible margin is only set to get harder this year. Due to the decline in registrations on new cars and the continuing gloomy economic climate car buyers are constantly looking for that value for money deal which will consistently be older, cheaper cars which suit their declining disposable income.
This challenge for dealers is taking an interesting turn, with many trying to face the issue of selling older cars by implementing some tougher measures. For example – and this should be better for the consumer – there is likely to be a greater emphasis put on the part-exchange valuation given when a buyer is negotiating a deal on another car. As one dealer told us;
‘if I have to pay £oos into book at auction and through the trade for suitable cars, I should pay the same if not more for a potential customers car which fits the same profile, that way I gain another customer, a profit from the car I sell, a potential profit from the trade-in and if I look after them. on going profit in my aftersales dept.’
This is a very sensible approach but shouldn’t a policy like that be the norm? Shouldn’t customers who support the dealer by buying a car expect the top price for his or her existing car, especially if it is car with a retail future?
Clearly not or there wouldn’t be so many online buying sites snapping up thousands of customers cars each year, most of whom will surely need to find replacements presumably.
The other discussions going on in dealerships revolve around how they manage older cars internally when competing with smaller dealers, with smaller overheads and a more pragmatic approach to selling this profile of cars. The arguments between sales and service about how much it should cost to prepare and present a car for retail are on-going and have been debated in the trade for years but another problem is around the skill set of the modern day sales exec, especially in franchised dealers when all they ever generally sell are new cars or low mileage 18 month old used cars which are generally pristine. Ask them to sell a 5 year old 60k car which will obviously not look like the brand new one – but will obviously have a price which reflects this – and they have neither the experience nor the expertise to be able to sell to customers who may have high expectations but are generally realistic enough to know that a car such as this will have some minor imperfections and some wear and tear.
Dealers are going to have to introduce discounted internal labour rates and look at the bigger picture when it comes to sharing the burden (and the profits) on these cars as the historic conflict between sales and service is still alive and kicking, even in today’s modern world.
The drive to become more flexible and attract different customer profiles with different budgets will assist retailers in retaining loyal customers who will come into the brand at a much earlier time and will be likely to stick with the that dealer if the service and product is right.
One thing is for sure; those that do not embrace the concept of selling older cars will be left far behind and will struggle to ensure that their forecourts are stocked with right amount of cars with the right profile to ensure they are sold profitably.