What sort of uplift, if any, would you pay to buy a car from a main dealer? That is a question being pondered in franchised car dealerships every day.
It is pretty well acknowledged that most customers would buy nearly new cars from main dealers but once they get to over 3 years, and many manufacturers warranties have run out, buyers are far more likely to buy from independent dealers or indeed privately.
However this scenario is now causing franchised dealers no end of problems.
Although they recognise the need to have a broader age profile in their inventories because more dealers across the spectrum are also chasing this harder to source stock, they have also realised that this not a natural or large part of the cars they usually retail. Indeed we are only now hearing about the need to sell older cars in franchised dealers filtering down from the powers that be as the volume of new cars has shrunk so dramatically in recent years.
The biggest pressure on volumes and profitability are on nearly new, ex-daily rental stock and the like and as a consequence branded dealers must go out of their comfort zone to try and acquire cars they have neither the experience nor the expertise to source.
In many independent dealers the owner is usually the day to day decision maker and can therefore make a decision about particular cars viability to attract a profit for the whole business and not just one department within that business. They are more likely to spend the money to refurbish it to retail standard and still achieve a profit, whereas in the franchised dealer line managers are often left to decide the cars fate based on how much it will cost to refurbish it and how much the sales department thinks it can retail it for. Also with the aftersales departments often relying on its sales department for more than half its income the service managers are reluctant to charge a reduced rate in order to keep re-con costs down.
As a result the sales manager then goes back to the original question; how much more is a customer likely to pay to buy from me with the manufacturers name above the door instead of the independent?
Sure in many cases the work would have been carried out using genuine parts, the likelihood that all work advised will need to be carried out in accordance with manufacturers guidelines, the quality of the warranties and the crippling fear of bad publicity are all deciding factors but more importantly in a (double dip) recession where price, despite what many may have us believe, is THE deciding factor, what is the actual figure car buyers will accept?
All this means franchised dealers will need to get their act together in order to get a larger slice of a shrinking market, and the old luddite ways which unbelievably still exist in many car showrooms could ultimately end up costing them customers and profit.
Subscribe to Motor Trade Insider by Email