While 2002 new-vehicle sales estimate consensus are down approximately 10% from the 17.2 million sales level in 2001, used-vehicle sales are expected to increase in total.
Depending on which report you read, franchised dealer used-vehicle sales in 2001 totaled between 12.9 million (NADA) and 15.9 million (ADESA). Total used vehicle sales, all sources, for 2002 are predicted to be in the 43 million-unit range.
Regardless of the source, we can all agree on the used-vehicle retail sales opportunities that exist for the franchised dealer this year. The question is, how do we capitalize and increase our volume and gross?
First we must identify our local market. You have first-hand knowledge of the new-vehicle retail volume in your market, but do you have the same knowledge of the used-vehicle market?
There are reports available, e.g. Cross Sell, for many markets that will help you identify the total market size and other pertinent information about vehicles that are retailed by all sources.
In your own personal operations, there are many pieces of the puzzle where having complete information will help you take full advantage of the opportunity. If you haven't captured this information previously, hire a temporary worker to go back three calendar years and create a monthly report. Once this historical information is in place, going forward, you will find items and trends that will help you increase your sales volume and gross.
The used-vehicle department is like the parts department. Think about items the parts manager is concerned with and measures. Now, compare captured parts management information to the level of information you capture and possess for your used-vehicle business.
Terms such as stocking levels, ideal reorder points, fast moving parts, gross turn, true turn, lost sales and level of service are key measurement and management tools in the parts department.
Now let's think about the used-vehicle business. What is your ideal stocking level based on turn? Which units sell the most quickly? What age unit produces the highest gross profit? What is your gross turn and true turn? In other words, the same management principles apply.
Listing the total retail used-vehicle sales (car and trucks separately) by individual month for three previous calendar years. By doing this you will identify which months represents the greatest potential.
You can plan your inventory needs in advance as well as your advertising.
Why would you want your inventory level to be the same in February as in June when February represents 6% of your annual sales volume and June 11%?
Once we have established this information, we can begin looking deeper. What was the average age of cars and trucks sold in the respective months? Which age vehicle on average created the most gross?
Other information you might track is your sales mix, car and truck, by make and segment. If I am a franchised Ford dealer, do I sell only used Fords or all makes and models?
Early in my career, while a used-vehicle manager, a good dealer told me that my inventory contained too many of my new-vehicle franchise products. When I questioned him, he made a single point that helped us improve our volume and gross.
He noted that our franchise sign would generate traffic and create a certain volume of sales, but that we could increase volume and gross by looking at the total market, what was being sold in total and stocking the most desirable products from other franchises.
Bottom line, it worked.
Today, you have the ability to identify, stock and sell the top-selling used cars and trucks in your market. This isn't rocket science, but it is a science. If you make the commitment to identify your market, make adjustments as required and follow the roadmap, you will increase your volume and gross.
Tony Noland is director of international operations for NCM Associates. He has 30 years of automotive retail experience.
For information to obtain a complete analysis of your financial operation in comparison with Best Practices benchmarks, fax a written request to (913) 649-7429.