One of my favorite quotes is ‘those who refuse to learn from history are condemned to relive it’. Only time will tell how much we will learn from this current dilemma, but one thing for certain – opinions on the situation are everywhere.
I read with interest an article by Dale Pollak in Dealer Magazine titled “How do You Make Used Car Profit Today?” To summarize briefly, Pollak says the used car market is never going to be the same; no longer can the benchmark ‘be average per unit’ when discussing a dealership’s used car operation, but rather ‘total used car gross profit’.
Pollak admitted his view may draw criticism, but this statement I feel is true:
“High average gross profit will not be the result of sitting across the table from a prospective buyer and convincing them to pay more than they should or need to for a similar vehicle. It is simply too easy for them to know better.” There’s that word again – Internet!
Two strategies were offered by Pollak as being critical for ‘S&P’ – that’s Surviving and Prospering. First, a dealership must have the ‘right’ cars on the lot. To do so they must utilize all tools available in measuring local market vehicle demand against local supply. I agree with that! We been hearing the term ‘information age’ for a long time, and the Internet goes both ways in providing insight for buyers and sellers.
The second point Pollak discussed is related to turn rate, to use his term – ‘velocity’. The premise is a dealership with a fresher unit should be able to price it for less and gross more compared to a dealership where a similar unit has sat unsold because of a higher price. I am not sure this is apples to apples, but does prove how important it is to daily, daily study your inventory status.
What are you going to say – these are difficult times, challenging times, time for change, the end of time? I say when it comes to ‘velocity’ change has never come so fast. Make it your business to stay ahead in terms of Automotive Intelligence because that’s what S&P is all about.