When we look at the new car retail industry today, realizing the number of nameplates we're competing with out there, we have to ask ourselves a question: Are we going to increase our new car volume on straight sale, no-trade deals? The answer to that question is "no." A straight sale deal is a no-brainer. You're either going to take it or you're going to pass on it. A lot of these straight sale deals are generated from advertising, which actually produces no new car gross profit and in a lot of cases never even pays for the ads that are run.
As dealers, we have to look closely at the deals that we are missing. That's the vital link today. The majority of deals that we're missing are deals that have trade-ins involved. For the most part, trade-ins are of conquest make, or of a make other than the new car sign hanging outside of your facility. When we look at franchised dealerships getting aggressive in the automotive market today, they're realizing that the cash involved in a used vehicle department is there for a reason. Identifying that reason and the purpose for those funds is probably the most fundamental basic part of your day-to-day operation. You funded your used vehicle department with operating capital to enable a used vehicle manager to invest that cash in a consumer's trade, to enable them to make a new or used car purchase while having the opportunity to wholesale that vehicle to recover your capital, or to recon (which also generates service and parts gross) and retail that vehicle for an additional profit. The problem with the majority of the dealers today, is they have gotten themselves in a box of only holding their own product line, or sister/brother product lines within a manufacturer.
I can only gauge relative prosperity by the dealerships we work with that have the highest net profit bottom lines and highest return on investments in used vehicle departments. These are the dealerships who can trade and retail for anything because they teach used vehicle product knowledge on off-make products with the same amount of enthusiasm and professionalism that they do their own pre-owned product line.
Now we've got certified programs out there. Some of these programs are excellent, some are not worth even mentioning. But the key to selling certified vehicles, as well as selling new cars, is being able to take a competitive make owner outto put that product in the market place. Merchandising these vehicles is a very important factor as well. When you look at the individual who sells 50+% of all used cars sold monthly, what do they do to advertise or sell their product?
They use print. They use the classified advertising sections to sell. They use the liner ads to sell their product.
They merchandise their product. They do it in high traffic areas, such as Wal-Mart parking lots, grocery store parking lots, etc. On the same high-traffic area streets that their vehicles are merchandised are numerous dealerships in the same high-traffic areas. Now if you look at the front line of vehicles for sale in a Wal-Mart, you don't see all Fords, you don't see all Toyotas. You see a mix of motor homes, motorcycles, boats, trucks, cars, etc. Fifty percent of all vehicles sold are from a visual drive-by. If you are a Ford dealer, everybody in that town knows that you have Ford products there, both new and used. So if you are merchandising pre-owned vehicles in your Ford store and all you have is Ford on your front line, there is no reason for them to stop and question any other make. If you are a Ford dealer, what you need to have on that front line are a variety of conquest products mixed in with your own. You're sending a message that not only do we sell these vehicles, but we trade for these vehicles as well. It's the same for any other brand you may sell. This isn't brain surgery here.
I look forward to seeing you in New Orleans.