It goes without saying that, thus far, 1999 has been a tremendous year for new-vehicle sales. The NCM benchmark dealers have seen increases in both their volume and gross. The 1999 year to date results are noted below:
But has this increase in new-vehicle volume created a decrease in used-vehicle retail volume? Definitively not. Even though one would think used-vehicles retail sales are down, the fact is, our benchmark clients have made the necessary inventory adjustments and taken advantage of this also hot market. The used- vehicle results are noted below:
I have spoken with many dealers reg-arding the effect of new-vehicle incentives on their used-vehicle business. There are two differing thoughts about this situation. One is to accept that the combination of strong manufacturer's incentives and a strong economy have created a dream new-vehicle market.
This market and the increased new-vehicle business have offset their lost used-vehicle retail volume and gross. Besides, with attractive finance rates, customers can in some cases, buy a new vehicle and have their monthly payments less than if they had purchased a one- or two-year-old program or off-lease vehicle. With this being case, it would be unwise to overstock used-vehicle inventory with late-model vehicles. This is true.
The second-thought pro-cess also is to accept gladly that the new-vehicle business is strong and to take full advantage of it. But, this group of dealers realizes there also is a real opportunity to increase their used- vehicle volume and gross. They too realize that if they "load" their used-vehicle inventories with one- and two-year-old used vehicles, the chances are good they will have an aging problem and increased wholesale losses.
So, if this is the case, what steps have these dealers taken to increase their used volume and gross? In most cases, they have made the necessary adjustments in the average year model of their used-vehicle inventory. In other words, instead of competing with the new-vehicle market, they have taken advantage of it and the older trades it has afforded. They not only are stepping up and trading for the older cars, they are out actively buying them from auctions, from individuals and from other dealers.
By taking an offensive position as opposed to a defensive one, these dealers have increased not only their retail volume, but also their gross and F&I. An added benefit to this business is the message these dealers are sending to their personnel about the potential that exists in this market relative to older vehicles they previously might have sent to the auctions or wholesaled.
Not if, but when the tide turns against the new-vehicle business, the dealers taking a proactive approach relative to the used-vehicle business today will be the ones we compare ourselves to, the benchmark dealers, in the near future.
Don't wait, call your used-vehicle manager and buyer into your office today and start devising a plan that will allow you to take advantage of this business. It's out there. Give it a try. You will be pleased with your results.
Tony Noland is director of international operations for NCM Associates. He has 30 years of automotive retail experience.