What’s the Silver Lining in this New Car Sales Slump We’re In?

According to an article in Automotive News, dealerships are in a new car sales slump and have to increasingly rely on used car sales and service revenue to drive profits. Industry experts recognize that used cars are typically more profitable to a dealership than new.

 

Competing predominantly on price, dealerships moving new vehicles frequently end up with low front-end margins. However, when it comes used vehicle buying or trading, there is more opportunity to make a profit. But, due to increased demand for used vehicles, auction prices have risen, as have used vehicle values. Some dealers now have to travel longer distances to stock their inventory. In addition, many can no longer place as much emphasis on used vehicle acquisitions from customer trade-ins.

 

According to the article, the competition for used vehicles is so fierce that dealers are taking to classified ad platforms such as Craigslist to attract consumers looking to sell their used vehicles. This practice reduces industry competition for inventory and allows the dealer to hold more gross profit after reconditioning and detailing. This benefits customers in the market for a vehicle as they can buy a used car that has already been hit with a large depreciation, making it more affordable. Dealers win as well as these used cars, in general, provide higher front-end profit.

 

But there is a whole other way this used car sales trend benefits consumers… recalls!

 

Unlike a new car, it is illegal for a dealership to sell a used car with an open recall. Now, private sellers and dealers must consider whether vehicles plagued with open recalls run the risk of devaluation…Ouch!  Because of this, dealers looking to purchase these vehicles have to factor in the costs involved with performing any needed recall repairs prior to sale.

 

If the used vehicle is of the same brand as the acquiring dealership, the recall can easily be repaired at the dealership with no additional cost, as the manufacturer pays for the labor and parts. It’s a strategy deployed at several dealerships nationwide, but primarily born out of reconditioning efficiencies.

 

Recalls add another layer complexity for dealerships looking to acquire off-brand vehicles. Profit margins can dramatically fall during the reconditioning process due to delays when repairs must be performed at a neighboring franchise dealership that is authorized to make such repairs.

 

The search for used car inventory could be right in your back yard in the form of recalls. Recall repairs are not only the right thing to do but may turn out to be a smart tactic for replenishing your used car inventory.

 

In addition, about 50% of consumers opt for additional repairs to keep their vehicle operating at an acceptable level of performance. The other 50% may be open to an offer to sell their vehicle to you. 

 

Those dealers who successfully acquire inventory through private parties will, more than likely, end up with a profitable sale. And there is the added benefit to society as we end up with vehicles sold by dealers that are safe for the consumer and their fellow drivers.

 

While a decline is new car sales is certainly not an event worthy of applause, perhaps the silver lining is that the rise in used car sales can assist in the overall recall repair completion rates and increase dealership profits.

Views: 7

Comment

You need to be a member of DealerELITE.net to add comments!

Join DealerELITE.net

Latest Activity

Bill Wittenmyer posted a video

WittsWiseWords: Super Workers

Are you setting your employees up for success? In this #WittsWiseWords, automotive retail expert Bill Wittenmyer talks about why your super-start employee ma...
17 hours ago
Michael Trasatti posted a video

New Thought Processes in Hiring

Mike Trasatti shares why companies should rethink their hiring processes in this video blog.
17 hours ago
Samuel posted a blog post

Top Anti Phishing Softwares that are Affordable

As the security threat is increasing more, people look for a secure way to increase their data…See More
18 hours ago
Courtney Evans posted a blog post
Friday
Anthony Giagnacovo posted a blog post
Friday
Mike theCarGuy Correra posted a video

Why Buy In is Important When Adopting New Technology

Account Manager Mike Correra shares why staff buy-in is vital to success when adopting new technology.
Friday
Jim Flint posted a blog post
Friday
Damian Boudreaux posted blog posts
Friday
John Sternal posted a blog post

Auto Loan & Lease Origination Data Through April 2019

Here is the most recent auto loan and lease origination data and trends from Equifax.  Key…See More
Wednesday
Bill Wittenmyer posted a video

#WittsWiseWords: F&I - Be the Most Obvious Choice

As dealerships shift their staffing structure to streamline the car buying experience for today's connected car shopper, Bill Wittenmyer explains the benefit...
Wednesday
Mike Esposito posted a blog post

Technology Can’t Replace Process

Dealers often look for new technology solutions to help them solve a problem, and rightfully so.…See More
Wednesday
Erik Nachbahr, CISSP posted a blog post

How to Build a Human Firewall

Cyberattacks are on the rise. In the first six months of 2019, the number of data breaches has…See More
Sep 10
Eliana Raggio posted events
Sep 10
Eliana Raggio updated an event
Thumbnail

FREE WEBINAR: How to Get 5-Stars and New Leads at https://digitalairstrike.com/webinars/How-to-Get-5-Stars-and-New-Leads

September 12, 2019 from 12pm to 1pm
Did you know that nearly half of all consumers are choosing businesses and brands based on online…See More
Sep 10
Jim Flint posted a blog post
Sep 10
Mike Esposito posted a blog post

Auto/Mate Integrates DMS with Text2Drive Text Messaging Platform

Albany, N.Y. – September 9, 2019 – Auto/Mate Dealership Systems announced today it has successfully…See More
Sep 9
Crystal Hartwell posted a blog post
Sep 9
Michael Trasatti posted a video

How Do You Deal With Stress?

CEO Mike Trasatti shares the importance of dealing with stress personally and within your dealership.
Sep 9
Ryan Holman posted a blog post

Dealing With Auto Dealership Business Is Easier With Billboard Advertising

Technology has changed the marketing world today, and billboards are an innovative form of it. We…See More
Sep 9
Simon Hopes posted a blog post

How to Turn Driving Into a Professional Job

Some people were born to be behind the wheel – and there are many ways to turn this unique passion…See More
Sep 9

Get Newsletter

© 2019   Created by DealerELITE.   Powered by

Badges  |  Report an Issue  |  Terms of Service