Autos, White Papers

All economic downturns cause manufacturers to dial back the variable elements of production, primarily labor and materials. These can be brought back when times become good again. This time, plant capacity was cut. That cannot be easily replaced. This is impact sales of used vehicles and accessories for years to come.

Internationally, there is still plenty of excess capacity for auto production. However, what matters to dealers is the production capacity for the brands they sell. Increasingly, dealers may be disappointed in their inability to obtain inventory for hot, new vehicles.

At the same time, the supply of late-model used vehicles is going to remain low for years to come. So where are dealers going to get the product consumers demand? Some of the answer will come from huge bubble of used vehicles originally sold from 1999 to 2007, often combined with accessory sales. Many of these will be reliable for years to come. On average, they will stay in the national fleet longer than their lower-quality predecessors.

Quality is not enough. In order for older vehicles to be worth investing in with parts, service, and accessories, they must be of a desirable style. The vehicles built and sold prior to the spike in gasoline prices that occurred in the summer of 2008 are generally larger than those being sold today. The nation will never again purchase a fleet of new vehicles as large as those sold from 1999 to 2007. Yet the pool of auto buyers is aging and becoming more obese, both contributors to demand for larger vehicles.
Taking advantage of these converging shifts in supply and demand requires four key changes in dealer activity.
1. Develop a competency for obtaining older used vehicles
2. Develop a competency for reconditioning older used vehicles for maximum profitability
3. Develop a pricing, sales, and marketing system that maximizes total gross margins and minimizes inventory days-to-turn
4. Develop a system for increasing accessory sales related to new and used vehicles

Dealers of domestic franchises have the most to gain from making these shifts. The number of 1999 to 2007 model year Ford, Chrysler, GM vehicles resold each year will dwarf the number of new vehicle sales from these brands for years to come.

Many of these dealerships have the necessary store capacity, including service. The question at the individual store level is whether the organization has the ability to manage this much change at one time. For many stores, slight modifications to the existing way of doing business will result in disaster. Accept that adding older vehicles to your product mix requires large-scale change before making the decision to do so.

As an automotive marketing consultant, I make it my business to know where the deals are for dealers. The following views are my own with no input or compensation from the companies mentioned, so check with each company directly for an actual offer.

1. CarWoo
This company does not accept money from dealers. Their sole source of income is from consumers who pay for their service. Dealerships accepted to receive CarWoo referral opportunities will never write a check to CarWoo, but do need to learn how to profitably submit offers to CarWoo shoppers. The volume of opportunities will be relatively low, roughly 10 per month but less in some markets. In my view, the dealership should have one or two dedicated individuals handling these referrals with one of them available at any given time for immediate response. These shoppers are paying for the service. They intend to buy a vehicle, and well over 80% of them do buy in less than one month, most right away. The program is very successful in California and Florida, where it was piloted with over 900 dealers. CarWoo is now ready to bust out nationally. http://dealers.carwoo.com

2. CarFolks
Industry guru, Dale Pollak, makes the point that documentation is the new negotiations. His RealDeal solution from vAuto is a great example of documenting the value of the vehicle. CarFolks offers dealerships and salespeople an opportunity to document the value of buying from them. Increasingly, shoppers consider two or more vehicles of roughly the same value. Often, the sale goes to the dealership or salesperson who can best document themselves with ratings and testimonials from an independent third-party. Any salesperson can register on CarFolks.com for free. There is a modest charge for registering the store itself. At a minimum, dealerships should get their salespeople registered and accustom to asking for ratings and referrals and demonstrating them. My recommendation is a separate deal jacket with documentation on the store and salesperson that can be shown to the customer. This can be as simple as printing out the CarFolks profile. http://carfolks.com/join

3. Cars.com Chat
Most franchised dealers use Cars.com, but only about half of those dealers take advantage of Cars.com's free chat program. This is an excellent way to begin using chat. The program is only free from in financial sense. You will need to change your operation. However, this is generally pretty easy and very profitable. Contact At Once is the provider selected by Cars.com and the largest chat provider in the industry. They offer a host of free training programs to help get your staff up to speed. http://Dealers.Cars.com or directly to chat http://tinyurl.com/27oatb7

With new programs, there is nearly always a cost involved in changing your operations. Look for profit-generating solutions offered by companies willing to not just sell you something but help you adapt and prosper.

Related files: 

Three Great Values in Automotive Marketing.pdf

The following presentation shows how Persuasion is an effective way of advertising.

In this training, dealers learn how to budget thier advertising effectively and efficiently.

This 6-minute training program will introduce you to the four leading marketing strategies for auto dealers and discuss the benefits and challenges of each.