Today’s auto industry is fiercely competitive, and independent dealerships are facing headwinds that are out of their control. Despite optimistic predictions for 2022, dealers are still facing significant inventory challenges. The cost of running a dealership is at its highest since measurements began in 2017. The used-vehicle sales index is down 14 points from a year ago. Add to this inflation, the possibility of a recession, and weakening consumer confidence.
But even during challenging times, there are tried-and-true best practices for independent dealers to maximize the profitability of their used car operations.
1) Stay in your lane. If you’re strong at selling at F-150s, focus on F-150s. Don’t stray too far from your ideal inventory. Consumers value expertise, and successfully carving out a niche can take years. Don’t undo your hard work. Even if you have to spend the extra dollars to purchase specific vehicles, remember, in this market, you can make that up with the sale.
If flashy orange Mustangs are not in your wheelhouse, don’t start now. Turning your inventory is critical, and you don’t want to sit on vehicles you can’t sell. When the economy changes and the market resets, you don’t want to be left holding vehicles that have lost significant value and won’t move.
2) Stay on top of your social. Almost all dealerships have a social presence these days, but a rarely updated Facebook page won’t bring in leads. Gain name recognition, build your reputation, and help your customers through their buying journey by taking the time to craft a thoughtful social media presence. Your social media pages may be the first results a customer sees if they’ve Googled your name—make sure they like what they find.
Recent customers are most likely to remember the details of their experience, so don’t forget to reach back out to them shortly after the sale. Encouraging feedback can also help you map out ways to improve your customer experience and gain the upper hand in situations where the sales price or other benefits may not be enough to differentiate your dealership from the one down the street.
3) More dealers have realized that CPO programs have many benefits, including higher profits, higher F&I attachment rates, and faster turn rates. These programs are also a great way to boost your dealership’s reputation and build customer loyalty and trust.
But for a CPO program to be successful, your sales team must be able to clearly explain the value of purchasing a CPO vehicle versus a non-CPO vehicle. Why does this vehicle qualify for CPO, and this one doesn’t? And once a customer has peace of mind in the CPO coverage that comes with their vehicle, they are three times more likely to upsell into longer terms and coverage levels to enhance their ownership experience.
4) Work to your sales teams’ strengths. Let’s revisit those orange Mustangs. If your sales staff does have a lot of experience with Mustangs, if one comes onto your lot with a squeak or a rattle, they’re more likely to know what that squeak or rattle could be and have an honest conversation with customers. If you start filling your lot with F-150s, it’s harder for them to discuss the vehicle and its condition with prospective buyers.
The more your sales team knows about the cars they’re selling, the more comfortable customers are likely to feel with the entire process.
5) Every penny counts. It’s always a good idea to control your dealership’s expenses, but in this economy, just about every industry has to monitor their output. List all your expenses and separate them into three categories: must-haves, nice-to-haves, and just unnecessary. Things like paying for a service to come onto your lot to wash your cars may not be a line item that makes sense right now if you can do it yourself.
Look at your CarFax bills, Auto Trader bills, website provider invoices, or any area where there’s an opportunity to cut costs. Call your internet and phone companies to check for promos or lower monthly fees. Can you adjust your insurance coverages for a better rate? Running a leaner business helps you put more money into the vehicles you need to move in order to hit your sales goals. Cutting costs to minimize overhead and protect dealer profit can help weather the current environment.
Boosting your sales numbers can be challenging even during the best times, especially if you’re a smaller independent dealership. For more strategies and tips to improve your marketing and sales efforts, follow GWC on LinkedIn and subscribe to Accelerate, our industry-leading blog.