You pay good money to create a bigger ‘net’ and then you sabotage it with your Used Car inventory mix. Yes, you can be a successful dealer with a used car inventory of 75% or more of your own brand, but that’s not the point. The point is that you spend money on Cars.com and AutoTrader to create a bigger net, but if you are a Ford or Honda dealer with a used car inventory that is predominately Ford or Honda, you are decreasing the size of your net.
Two things are working against you when you have more than 60% of your used inventory as the brand you sell new:
- The Internet: Yes, it’s been around for a long time now, but let’s review why the internet makes it silly to have your brand heavily represented in your used car inventory. You put out your net (AutoTrader, Cars.com) to get your inventory viewed by the most possible buyers, but when you mostly have just your brand, the net is now being made smaller.
- Your brand has its limitations: Brands like Honda and Toyota hold their value – this has the effect of limiting your price points. If you only have Honda’s or Toyota’s in your used inventory, you’ve restricted a large number of buyers who may want a more recent model or lower mileage, but don’t have the cash because of the resale value of Honda’s and Toyota’s. Brands like VW are even more limiting due to their actual or perceived cost of repair on vehicles with more than 50,000 miles on them. The internet plays a part in this as well as it brings more information to the consumer that would dissuade them purchasing a used VW.
When I look around the country at some of the most successful dealer operations in their respective markets, I see a trend toward keeping the ‘brand’ portion of their used inventory down below 60%. Milham Ford Toyota in Easton PA: 30% Ford/Toyota in used inventory. Fred Haas Nissan in Houston TX: 38% Nissan. Tameron Honda in Birmingham AL: 30% Honda. Carriage Nissan in Atlanta GA area: 21% Nissan. These are but a few of the dealerships that have taken this idea to extremes, but I know that these are highly profitable stores.
I know I have written about this before. The reason I’m writing about it now is because it’s a point of operation that must be looked at seriously if you are interested in increasing your market share. There are only so many vehicles that are going to be sold in your market in any given months. You cannot increase your market share unless you increase the size of your net!