If you’re a used car dealership, you’re probably feeling the pressure to maximize your profitability. Thanks to disruptions from the ongoing pandemic, many dealerships have suddenly shifted to being predominantly pre-owned, to the point where IHS Markit research found that in May 2020, there were three used vehicles sold for every new vehicle sold. In this blog post, we’ll share pre-owned dealership best practices to help you maximize your profitability, including:
- Building a profitable used car inventory mix by targeting drivers of in-demand trade-ins
- Building and engaging a profitable pre-owned customer audience
- Simplifying your car sales process to reduce overhead costs and improve dealership efficiency
1. Building a Profitable Used Car Inventory Mix
Any used car dealer can tell you that one of the keys to profitability is having the right mix of cars in inventory. The right mix means having the types of cars that customers in your area are looking for. To do this, you need to target drivers of in-demand trade-ins. For example, if you know that SUV drivers frequently trade in their vehicles for smaller cars, you can stock up on smaller cars that will appeal to those SUV drivers. By having the right mix of vehicles in stock, you’ll be able to attract more customers and close more deals.
Know Your Customers’ Trade-Ins
The first step to knowing what kind of inventory mix will work best for your dealership is to understand what kind of trade-ins your customers are looking for. This means understanding not just the make and model but also things like body type, engine size, and options. To get this information, you can survey your customers or create a focus group. Once you have an idea of what your customers want, you can start stocking your lot with those types of vehicles.
Understand What’s Popular in Your Area
Another important factor to consider when deciding what kind of inventory mix to have is what’s popular in your area. Certain makes and models will be more popular in certain parts of the country than others. For example, convertibles might sell well in sunny California but not so much in snowy Michigan. To find out what’s popular in your area, talk to other dealerships or look at online classified ads to see what’s being bought and sold. Then, stock your lot with those types of vehicles.
Consider Your Competition
You should also take your competition into account when deciding what kind of inventory mix to carry. If all the dealerships in your area are selling SUVs, you might be able to get an edge by carrying more sedans. But if there’s already a dealership down the street that’s known for its selection of sedans, it might not make sense for you to go against the grain. Instead, try to find a niche that isn’t being served by any of the other dealerships in your area. For example, if there are no dealerships specializing in luxury vehicles, you could fill that void and become known as the go-to place for luxury car shoppers.
The right mix of vehicles is essential for any used car dealership that wants to be profitable. To get the mix right, you need to understand what kind of trade-ins your customers are looking for and what’s popular in your area. You should also take your competition into account when making decisions about which vehicles to stock. By following these tips, you’ll be on your way to creating a profitable inventory mix for your dealership.
2. Building and Engaging a Profitable Pre-Owned Customer Audience
Who is your Ideal Customer?
Before you can start building and engaging a profitable pre-owned customer audience, you need to first identify who your ideal customer is. To do this, consider factors such as demographics (age, gender, location, etc.), psychographics (lifestyle, interests, values), and behavior (car buying history, online research habits, etc.). Once you have a good understanding of who your ideal customer is, you can start creating marketing campaigns and content that will speak directly to them.
For example, if you’re trying to reach young families who are in the market for their first pre-owned car, then you might want to create content that focuses on the features of your vehicles that are most important to young families (e.g., safety features, fuel efficiency, family-friendly features). You would then want to use channels like social media and email marketing to reach these families where they’re already spending their time online.
Engaging your Pre-Owned Customer Audience
Once you’ve identified your ideal customer and created marketing campaigns and content that will appeal to them, it’s time to start engaging your audience. As we mentioned earlier, social media and email marketing are great ways to stay top of mind with your customers. However, it’s important to make sure that the content you’re sharing is interesting and relevant; otherwise, you run the risk of turning off your audience or even worse—making them unsubscribe from your list.
Here are a few ideas for engaging content:
• Share relevant industry news: Keeping your customers up-to-date on industry news shows that you’re knowledgeable about the space and helps position you as a trusted resource. Just be sure to avoid any hard sell in your headlines or copy—nobody likes feeling like they’re being sold to!
• Offer exclusive discounts or promotions: Customers love feeling like they’re getting a good deal. So whether it’s offering a discount on their next purchase or giving them early access to sales or new arrivals—find ways to add value for your customers. Just be sure not set these promotions too often or they’ll lose their impact.
• Provide helpful tips or advice: Helping your customers solve a problem they’re facing shows that you care about more than just making a sale. And when they see the value in what you have to say, they’ll be more likely than ever to do business with you when they’re ready to buy.
3. Simplifying Your Car Sales Process
Finally, it’s important to simplify your car sales process to reduce overhead costs and improve dealership efficiency. One way to do this is by streamlining your paperwork using electronic forms and digital signatures. This will save you time and money while making it easier for your customers to do business with you. Additionally, consider implementing a CRM system so you can keep track of your leads and customers in one place. By simplifying your process, you’ll be able to close more deals and increase your profits.
Streamline Your Paperwork
One way to simplify your car sales process is to streamline your paperwork using electronic forms and digital signatures. This will save you time and money while making it easier for your customers to do business with you. Additionally, consider implementing a CRM system so you can keep track of your leads and customers in one place. By simplifying your process, you’ll be able to close more deals and increase your profits.
Use Technology to Your Advantage
Another way to simplify your car sales process is to use technology to your advantage. For example, many dealerships are now using online shopping tools that allow customers to browse their inventory from the comfort of their own homes. This not only saves time for the customer, but it also allows them to narrow down their options before even stepping foot in the dealership. As a result, you’ll have fewer people coming in who are just “window shopping” and more people who are serious about buying a car.
Make the Process Effortless for Your Customers
Finally, it’s important to make the process as effortless as possible for your customers. One way to do this is by offering financing options that work for them. For example, some dealerships offer “Buy Here Pay Here” financing, which means that the customer can make their payments at the dealership. This is a great option for people with bad credit or no credit history because it gives them a chance to rebuild their credit score.
These are just a few things you can do to maximize your used car dealership’s profitability. By building a profitable inventory mix, engaging a profitable customer audience, and simplifying your sales process, you’ll be well on your way to success.