Dealers need to take a close look at the age profile of their used cars

Franchised car dealers are looking for ways to extend their used car stock profile in order to grow market share. Traditionally most main dealers – who are predominately there to sell brand new cars – acquire many of their used cars from the manufacturers. As it is often ex-daily rental or head office management cars the age profile is such that the profile of their used car stock is weighted too heavily in favour of under 1 year old models.

In fairness the expertise is clearly in this kind of profile of used car and it is often the most profitable.

However given that new car sales across the board have shown year-on-year increases – in many cases at the expense of nearly new alternatives – there is a real feeling in the trade that, to put it bluntly, main dealers must try and sell older cars too.

New cars are being heavily supported and incentivised by the brands, as we have often highlighted, and it wouldn’t take more than a cursory perusal of the web to find subsidised finance or even 0% deals on offer, supported deposit contributions and heavily discounted cars to entice customers to buy new and this in turn has creates a downward pressure on used car volumes and margins.

Dealers have recognised that in order to grow volumes and attract a different profile of customer they need older, cheaper examples and when the expertise is in retailing new or nearly new cars the challenge is not one that will be overcome quickly.

For one thing the car supermarkets and independent dealers have proved is that they are the masters of this sector. They know not only what cars to stock and how to successfully market them profitably buy also how to manage the trade-off between preparation and presentation standards whilst still giving customers value for money.

Often due to the heavy handedness of the brands and the fact that retailing older cars is not natural to many franchised dealers, they get caught between two stools and ‘have a go’ at retailing the odd older car. However they tend to completely cut the programme at the first sight of a hefty re-con bill from their workshops, instead of all departments working in tandem with each other to deliver for the business (the old “wooden dollars” argument). They should perhaps focus on attracting customers who wouldn’t normally be able to afford certain cars but undoubtedly have the aspiration. If there were some older, higher mileage examples being offered more readily on the forecourts of main dealers there would more likely be people out there who would rather pay just a little more for the peace of mind of buying from a dealer with a manufacturer badge above the door. As a result of an older car policy the dealer could make a profit from cars and would gain incremental sales as a result.

There is a caveat to this however and as we see both Lookers and Pendragon being very proactive in trying to sell older cars through their car supermarket ventures, Lookers Trade Centres and Quicks, we have often had evidence of very successful experienced independent expert car dealers who despite these qualities are finding it extremely difficult to stay profitable in this economic climate.

So for franchised dealers looking to head off this problem could really do with employing some proper used car experts to help them achieve this. If not they may find that the cars they sell become few and far between as a result of the inventory being far too heavily weighted to nearly new examples, which are often run of the mill volume cars with low profitability.