Sales of new vehicles are expected to decline through the end of the year; however, pre-owned vehicles sales are surging. This indicates that new cars, with an average price tag of over $34,000, are out of reach for price-conscious consumers. Yet, many consumers still want a new-to-them vehicle. That’s why many dealers are prioritizing used vehicle inventory.
In some ways, marketing and selling pre-owned vehicles is easier than new because each vehicle is unique, so competition is sparse. The downside to stocking used vehicles is that you could end up with aging inventory that costs you money every day. A sound strategy is key to maximizing vehicle profitability.
Source vehicles from customers
Purchasing vehicles at auction is getting expensive. These days you can pay almost-retail prices at an auction, or get stuck with a vehicle that needs costly repairs to be front-line ready.
It’s more cost effective to source vehicles from current customers using equity mining. With this strategy you know the car, there are no transfer or auction fees, you’re not competing against other dealers, and you may be able to sell the customer another vehicle. That’s a true win.
An equity mining tool can help you identify owners in a position of equity. When combined with thorough follow-up and a strong BDC, equity mining is proven to deliver an ROI of 10 to 1; for every $1,000 spent, you’ll get $10,000 back.
Another way to get pre-owned vehicles is to follow what major online used car retailers are doing; offer free appraisals and no-obligation purchases of used vehicles.
Move vehicles fast
The average holding cost for a vehicle is $37 a day, according to NCM Associates. It’s clear that when a vehicle sits on your lot it doesn’t take long for your profit potential to shrink away. That’s why you need a clear strategy for getting vehicles front-line ready fast, and for staying on top of aging inventory. Streamline your reconditioning process, photography, and VDP creation to get vehicles in front of customers within days.
Use an inventory management tool to keep an eye on all inventory. Don’t wait until a vehicle has been sitting for 30 days to figure out why it’s not moving. Instead, look at every vehicle at the 15 and 20-day mark. Adjust marketing or have sales staff prioritize the vehicle if it’s not moving. The industry standard is to sell a vehicle in 30 days or less to maintain profitability.
Create compelling marketing
Marketing pre-owned vehicles can be easier because the inventory is unique so there’s not as much competition. However, you still need to give consumers a reason to buy. CPO programs vary by brand. Identify your program’s best-selling points and highlight them in your marketing and on VDPs. Sell consumers on detailed inspections, reconditioning, extended warranties, and peace of mind. A targeted marketing strategy can help you identify the best potential customers for a vehicle and send personalized offers or messages.
Nurture your leads
The pre-owned sales cycle is generally shorter than new, but lead follow up is still critical. A best practice is to look at daily sales activities in your CRM, including appointments set, outbound calls, connected calls, length of calls, emails and texts. Hold your sales team accountable for logging every activity. Are your salespeople offering more than one pre-owned option in their replies? How many times have they called the prospect? Remember it takes an average five attempts to reach someone on their phone.
Pre-owned vehicles can be highly profitable, but to capitalize on customer demand requires developing a sound buying, selling, and marketing strategy.