Each brand’s market share is subject to ups and downs. Even Toyota has seen some substantial dip in market share recently. A savvy dealer shouldn’t be held hostage to the swings in market share of their brand. This is why the days of keeping a used car inventory of 80% or 90% of your own brand is a thing of the past.
Almost every dealer spends thousands of dollars a month with lead aggregates such as Cars.com and AutoTrader to get ‘eyes’ on their inventory. Those ‘eyes’ that you are paying so dearly for, are your ticket to mitigating the ups and downs of your own brand. I know a dealer in PA who has both a Ford and a Toyota franchise under the same roof. They have concluded that in order to keep growing their market share, they need to have a used car inventory that maximizes the potential for a sale. As a result, their used vehicle brand mix is only about 45% Ford and Toyota. they keep a wide variety of brands and price points that address just about every opportunity for a sale that their marketing dollars have produced. They have Chevrolet, Dodge, VW, Nissan, BMW at prices from $5K to $30K. As a result, their market share just keeps growing and their advertising cost per vehicle sold keeps getting smaller.
Not every dealer can have the good fortune of two monster franchises like Ford and Toyota, but even with a Kia dealership, you need to take advantage of the ‘eyes’ you pay for to look at your inventory.
Since Cash-For-Clunkers screwed up the supply, the number of Independent dealers has shrunk substantially. The percentage of overall sales of passenger vehicles by Independent dealers has gone from 25% just a few years ago to about 16% today. That’s an opportunity for franchised dealers, who are smart enough, to take advantage of some rather large volumes. You figure that private parties account for about 26% of all sales of passenger vehicles – that means that 16% plus 26% = 42%, leaving 58% of all sales to franchised dealers. That is up from 49% just a few years ago. That is a lot of cars to be sold…millions of them.
Smarten up – your used car inventory of your own brand should be between 45% to 60%…tops!