Franchised car dealers chasing a bigger slice of a smaller pie

What sort of uplift, if any, would you pay to buy a car from a main dealer? That is a question being pondered in franchised car dealerships every day.
It is pretty well acknowledged that most customers would buy nearly new cars from main dealers but once they get to over 3 years, and many manufacturers warranties have run out, buyers are far more likely to buy from independent dealers or indeed privately.

However this scenario is now causing franchised dealers no end of problems.

Although they recognise the need to have a broader age profile in their inventories because more dealers across the spectrum are also chasing this harder to source stock, they have also realised that this not a natural or large part of the cars they usually retail. Indeed we are only now hearing about the need to sell older cars in franchised dealers filtering down from the powers that be as the volume of new cars has shrunk so dramatically in recent years.

The biggest pressure on volumes and profitability are on nearly new, ex-daily rental stock and the like and as a consequence branded dealers must go out of their comfort zone to try and acquire cars they have neither the experience nor the expertise to source.

In many independent dealers the owner is usually the day to day decision maker and can therefore make a decision about particular cars viability to attract a profit for the whole business and not just one department within that business. They are more likely to spend the money to refurbish it to retail standard and still achieve a profit, whereas in the franchised dealer line managers are often left to decide the cars fate based on how much it will cost to refurbish it and how much the sales department thinks it can retail it for. Also with the aftersales departments often relying on its sales department for more than half its income the service managers are reluctant to charge a reduced rate in order to keep re-con costs down.

As a result the sales manager then goes back to the original question; how much more is a customer likely to pay to buy from me with the manufacturers name above the door instead of the independent?

Sure in many cases the work would have been carried out using genuine parts, the likelihood that all work advised will need to be carried out in accordance with manufacturers guidelines, the quality of the warranties and the crippling fear of bad publicity are all deciding factors but more importantly in a (double dip) recession where price, despite what many may have us believe, is THE deciding factor, what is the actual figure car buyers will accept?

All this means franchised dealers will need to get their act together in order to get a larger slice of a shrinking market, and the old luddite ways which unbelievably still exist in many car showrooms could ultimately end up costing them customers and profit.

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2 Responses to Franchised car dealers chasing a bigger slice of a smaller pie

  1. Mark R April 25, 2012 at 10:26 pm #

    I have many many friends in the Main Agent gin palaces, from Sales Directors, to Service Managers, to Dealer Principals, all privately say the the same thing to me, How do you value that car with those miles ? How do you retail that? How do you get paintwork done that cheaply? and How on earth do you service it for that price? more importantly, How do you make a profit ? answer :……………… Experience Gentleman, Experience !

  2. maximile May 2, 2012 at 7:34 am #

    and not having to be responsible to shareholders or a board of directors,in your business Mark you are the sole decsion maker and therefore can apportion costs as you see fit,and there are probably local businesses that support you in external work and as a result give you prefered rates.the sales manager in a main dealer is a slave to the rest of the business and therefore that dictates his thinking on what cars he can and cant retail,and as a result usually means the easy low mileage high turn cars with no prep required,and until main dealers begin to operate more in the ‘whats best for the business’ style as dealers like you ar able to do you will always have the corner of that market.

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