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Why Maximizing Pre-Owned Profitability Starts with Smarter Acquisitions

Following global disruptions in auto production, dealership inventories have reached historic lows — resulting in increased demand for pre-owned vehicles. In response, dealers have shifted their focus heavily to used sales. But to compete in today’s unpredictable market and to ensure future success, dealers must do more than sell used cars. They need to maximize profitability of their entire pre-owned sales process. With little leeway to raise prices to accommodate gross profit, maximizing pre-owned inventory is key. 

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Acquiring the Right Vehicles for Success

With used margins typically thinner than new, it’s crucial that dealers establish processes to efficiently obtain, recondition and merchandise in-demand pre-owned vehicles.

Dealers have two options to acquire pre-owned cars: auction or trade. Buying pre-owned cars from auction enables dealerships to populate their inventory with vehicles they need at the right time, rather than waiting for the right cars to come in through trade. This is prime for acquiring in-demand models, but these acquisitions typically come at a higher cost and with less background information, limiting dealers to vehicle history and auction condition reports.

However, trade-ins let dealerships populate their inventory at a lower cost to market. By utilizing predictive marketing tools, dealers can improve the quality of their pre-owned vehicle selection by identifying and engaging owners of in-demand vehicles proactively, rather than waiting for an inquiry. 

Dealers can apply this same proactive approach to mining upcoming service appointments for acquisitions. Utilizing the same data-driven tools to analyze data like a customer’s maintenance and vehicle history, dealers can more effectively predict reconditioning costs. They can double down on service acquisitions by selling the customer a replacement vehicle, rather than buying a car at auction where someone else has already made the trade-in sale.

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Building a Profitable Pre-Owned Customer Base

The most profitable sales departments successfully match the right vehicle to the right customer while maintaining the lowest possible dealership costs. That’s why identifying and engaging potential buyers before they enter the sales process — and begin the lengthy process of price shopping — is crucial to maximizing profitability. 

Dealers quickly discover that despite the wealth of information available, predicting when customers are ready to purchase is a guessing game without the right predictive tools and insights. 

Predictive tools that integrate with a dealership’s CRM, DMS and other systems help simplify complicated customer journeys to improve the entire buying experience — starting from the first touchpoint. Not only can these predictive tools identify acquisition opportunities, they’re also critical to the development of data-driven marketing campaigns designed to maximize ROI and the chances of converting a prospect.

Uniting Fixed Ops & Variable Sales

Now is the time for dealers to consider how their sales and service departments operate in tandem. The “silo” system of treating each team as a separate department is largely outdated. Managing a profitable pre-owned process requires the entire dealership to work in coordination to reduce cycle time. 

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For example, take how sales and service interact. When a service visit converts to a sale, the service desk may lose a ticket, but greater opportunities are available. A CPO sale from a service ticket adds a reconditioning order and resets the vehicle’s warranty clock to ensure future service visits, all while potentially adding a new service customer. 

This approach can be applied beyond service and sales. As buyers increasingly consider pre-owned vehicles, your team should react accordingly. It’s critical that new and pre-owned sales teams work together to match customers to the vehicles they’re most likely to buy based on their needs and budget — while providing a great customer experience across departments.

According to IHS Markit, 9 million in-market consumers are currently ready to buy without any strong brand loyalty. Combined with piqued interested in used vehicles, dealers have a unique opportunity to take control of current industry trends to create a more profitable future by maximizing the value of their pre-owned inventory.

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