John Zapp, a dealership general manager in Oklahoma City, says pushing pre-owned vehicles has raised his profit per unit to seven times more than that on new cars.
When the need to escalate used-car sales arose, Zapp reconfigured his inventory by unloading slow sellers more quickly and cutting the supply from 200 to 100 days on the more attractive models.
“Volume is what matters,” says Zapp whose Group 1 Automotive-owned Bob Howard stores sell Buicks, Chryslers, Dodges, GMCs, Jeeps and Pontiacs.
“We keep our used-car inventories clean and outsell the nearby Toyota store in used units with a mere 27-day supply.”
Used cars now contribute the vast majority of his vehicle-sales gross profit says Zapp, who has been in the auto business for more than 35 years and was recently profiled in Fortune magazine.
He is not averse to getting the most for hot new models. He added $500 to $1,000 to the sticker price of Jeep's new 4-door Wrangler during the model's shortage last summer. He plans to charge up to $20,000 over the $38,000 sticker for the '09 Dodge Challenger SRT-8 muscle car when it arrives this summer.
“I've only been allotted six Challengers,” says Zapp. “They'll be hot and there's every reason to charge what the customers will pay.”
His used-car focus enabled his stores to make money. Zapp calls the pre-owned strategy his “ticket to survival.”