Boost Used-Car Profits

Every two years, NCM Associates Inc. studies our dealer clients' retail and wholesale used-vehicle sales trends. The following information is based on thousands of sales. Charts reflect the results of the average dealership participating in this study. With the exception of the initial chart, the information reflects all domestic and import franchise results. We found that on average, excluding high-line,

Every two years, NCM Associates Inc. studies our dealer clients' retail and wholesale used-vehicle sales trends.

The following information is based on thousands of sales. Charts reflect the results of the average dealership participating in this study. With the exception of the initial chart, the information reflects all domestic and import franchise results.

We found that on average, excluding high-line, the used vehicle department contributes 24% of the total dealership gross and 19.8% of the total dealership net profit. In the high-line dealership, the contribution to total gross is 13.4% and 2.4% to dealership net profit.

A most-interesting measurement is the price category mix and corresponding gross profit. The next chart indicates cars costing $6,000 and less represented 20.5% of the total retail car sales and command a respectful $1,429 gross per retail unit. Trucks less than $7,000 represent 14.1% of the sales with an average gross per retail unit of $1,509.

Important is average inventory aging, both by days and dollars. Inventory units over 60 days represent more than 12% of the units and 14.4% of the car inventory dollars and 12.6% of the truck dollars. Age affects our retail gross per unit.

The last two charts show sources of our retail inventories for cars and trucks.

Are we trading for, or are we purchasing our used vehicle inventory and what is the resulting gross profit? The two charts answer those questions.

Space limits the information I'm able to provide, but this data shows that the more things change, the more they stay the same.

We've seen for more than 25 years of conducting this study that age affects gross profit both on a retail and wholesale level. Our reconditioning cost increases as our vehicles in inventory are allowed to age. Our highest gross profits come from new vehicles trades, but we continue to trade for less than we purchase.

In 2003, there were more than 43 million used vehicles retailed in total. Franchised dealers have a greatest opportunity to take advantage of this market if we become disciplined in the way we approach it.

If we applied the same disciplines we use in our parts operations to the used vehicle operations, imagine the improvement.

Should you have any questions about the results of this study, email me and I'll try to provide the answer. Good selling!

Tony Noland ([email protected]) is the CEO and president of NCM Associates Inc.

TAGS: Dealers Retail
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