Margin Compression in the used car business is a popular buzzword these days, but the issue has been brewing for years. Beyond the phrase however, what can dealers do about it?
In the video below, you will meet three dealers who share their insight, offering up how they combat margin compression and improve profits. Each of them adheres to similar strategies and tactics, but prioritizing them and approaching them in unique fashion.
View the complete conversation on the original YouTube Live Video.
Dealer #1
Aaron Gomez, Owner of KMG Management, has been in vehicle purchasing and wholesale for more than 15 years. A big part of his strategy is in how he sources vehicles. In particular, he makes acquiring vehicles from private sellers a priority.
Trade-ins offer limited selection. Auctions comes with high costs. Not to mention that the vehicles at auction are typically there because they didn’t sell in retail.
By making acquiring vehicles from private sellers a preferred source, he gets better selection, and spends less acquiring them. Sounds simple enough, yes. But it is an art.
Dealer #2
Rickey Bomar from the Duval Motor Company is sensitive to turn. Therefore, he makes pricing a big part of the strategy. Careful not to “discount the discount,” he says, Bomar prices to sell at retail, ideally within 15 days.
He also points out that training your people can’t be taken lightly. Developing skills in your team members to be effective buyers is critical. Be it acquiring vehicles from private sellers or on trade.
Dealer #3
Brent Faron at Bo Beuckman Ford keeps a close eye on turn, as well. He likes to see vehicles move off the lot within 10 days. If they aren’t, then he starts marketing them for wholesale.
Another aspect of Brent’s strategy that secures margins? Knowing what he plans to do with vehicles as he acquires them. In other words, your disposition strategy.
Brent’s knack for disposition is cutting edge. By utilizing today’s tools and information, Brent has a feel for his profitability going into each acquisition, be it on trade, auction, or from a private seller.
Margin Compression - Take Control
Vehicle acquisition, disposition, and turn - three things you can focus on to directly impact your bottom line. Equipped with the right tools and information, these dealers are able to combat margin compression tactically, not theoretically, and grow their market share while securing their profits.
Progressive dealers understand that margin compression isn’t the problem. It’s a symptom of a larger problem - flaws in your process and with your strategy. They recognize the specific points within their process that steal from their bottom line. They also know which aspects of their strategy eat at their profits too.
