Should your dealership sell for profit or margin?
There’s never been a livelier time to run a car dealership.
While consumer demand for vehicles remains very strong, the market for acquiring new and used vehicles remains hugely challenging and fiercely competitive. Dealerships are fighting it out for new stock in an attempt to fill empty forecourt spaces, with prices for vehicles often reaching record-breaking figures – both in the wholesale and retail environments.
There’s clearly money to be made in vehicle retail, but what is the best way to make said money?
With prices rising in wholesale, it may be tempting to increase retail prices in order to recuperate a greater return on investment and increase profits. However, the more expensive a vehicle becomes, typically the longer it stays on the forecourt awaiting sale. Every car that sits on a forecourt for more than 30 days increases the risk for a dealer to lose money. Increases in days to sell result in depreciation in vehicle value, staff spending more money chasing a sale and more advertising costs incurred in marketing the vehicle successfully.
What if instead, you adopt a strategy that sees you attempt to sell two vehicles in the same timeframe but for a lower margin each?
By pricing competitively and selling quickly, it is possible to achieve a greater return on investment, since the vehicles have lower depreciation, and you’ve not incurred as much time and expense on making the sales. Obviously, such a strategy would require a strong and flexible source of capital to ensure you can continue to acquire vehicles for sale as quickly as they leave the forecourt.
How can you achieve this balance between profit and margin to sell more effectively in these bizarre market conditions?
Our Managing Director, Liam Quegan, recently spoke to Car Dealer to explain how this is possible. Make sure you check out his interview here.