This is Part II of a two-part series on Used Vehicle Acquisition in 2021. For the first part go here.
Part II - Wholesale Danger Zones and Your Sales-to-Service Ratio
Danger Zones in Wholesale
When asked what he thinks dealers in general should be weary of, Long says, “dealers with a scarcity mindset are going to rush out and get as many new cars they can possibly get, which is in my mind a bad model. And they're going to overpay for used cars and they're going to be in serious trouble. “
The efficiency model of making sure you have and are paying attention to the days supply by model line every single day and paying attention to trim lines has never been more important than it is right now.
Profitability vs. Market Share
On the subject of market share both Long and Dantzler agree that the idea of market share can be misleading. And market share for Jeff is not unique to new car dealers.
“It’s the human being share that matters,” explains Danntzler, suggesting that it’s not strictly about volume.
Mr. Dantzler also points out that profit is most impacted not by market share but by expenses.
“You can make all the profit in the world and over-expense yourself,” Dantzler says. “You can talk about market share as much as you want to and not look at your expenses and every line on the statement. But profitability, I mean, every dollar you save is a dollar profit.”
Sales-to-Service and Used Cars
Another idea that Dantzler highlighted was that market share is security and your sales-to-service process is related because, “once people start driving,” he says, “service ends up increasing because they keep their cars.”
Other challenging questions that Dantzler noted were...
What percentage that you are selling becomes RO’s that are going through the drive? What is your customer pay for those that are going through the drive? What is your retention in that drive and how many of those are RO’s are being talked to by your upgrade department?
It goes without saying that being a franchise dealer does have the advantage of new car sales. Any time you can put a customer in a brand new vehicle, you naturally set the stage for receiving that same vehicle down the line.
"Now may be the time to show them more security with a warranty on a new car that they only pay $10 more for, similar to a cell phone," explains Dantzler. "You get a lot more technology and an upgrade and it's only $10 more a month. And guess what we feed is our used car department."