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From: Jared Hamilton
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Ryan Gerardi

Ryan Gerardi Futurist

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Used Car Profit Begins with Acquisition, Not Liquidation

Making a profit in the used car business is increasingly more challenging. With consumers becoming smarter and having access to more information, plus more options, it seems the only way for dealers to remain competitive and profitable is to change their mindset.

Used car managers understand that the faster you turn your inventory, the more profit there is to be made. When you design your profit strategy around this fact, you stop looking at profit on a per-vehicle basis, and instead realize the bigger picture.

Finding the vehicles you want and achieving a faster turn with a higher gross begins with acquisition, not liquidation. The more quickly you find the vehicles you know you can sell retail, and of course the less you pay for them is the first step towards greater profit. I think it goes without saying that dealer auctions don’t help achieve your profitable acquisition goals.

When you're trying to keep your pre-owned lot stocked with high-quality, in-demand vehicles, dealing with auctions can be a costly and time-consuming process. For one, you have to wade through a range of vehicles that don't meet your needs before finding the right model, in the right year, with the right options. You also risk having your price bid up by competing dealers.

Private party listings are today’s best alternatives to stocking your lot and reducing your expenses. As many dealers already agree, buying used cars from consumers is more profitable compared with auctions and even vehicle trades. By going straight to the source, you acquire vehicles directly from private sellers in your target market, and with lower acquisition costs.

Many dealers balk at the idea of negotiating an acquisition from a consumer not committed to buying from them. They find it difficult and often a waste of time. But this is an obstacle that can and needs to be overcome with proper training and coaching, because your profit lies on the other side of this hurdle.

There are numerous examples of dealers maximizing profit potential through used cars. Not just independent dealers but franchise dealers too, often creating satellite stores or buy centers that make it easier for consumers to sell their vehicles and more cost-effective for dealers to obtain metal.

By adapting to this mindset, dealers will realize a fundamental shift in their business models that leads to higher profits.

Used Car Profit Begins with Acquisition, Not Liquidition

Questions...

What are you doing to acquire the vehicles you need? Do you have a buy center? Do you search for vehicles online listed by private sellers?

Do you evaluate used car profit on a per-unit basis or on your strategy as a whole?

Are you using online or physcial dealer auctions?

Mark Rask

We are starting to pay our salespeople if they assist in the buying of a car

Alex Lau

You're exactly right!

Big Tom LaPointe

Same lessons as real estate - you make your money when you BUY, not when you sell. If you're in it wrong, the digital market value tools of today make it hard to dig out of it with a lucky sale

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