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Dealers make their profits on service and used cars

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Why Dealers Like Used Cars

(Mon 11 Sep 06)

Car dealerships are likely to devote more attention to sales of used cars, according to a report released by industry watcher Trend Tracker. In 2005, new cars accounted for 46.4% of the sales achieved by franchised dealers, compared with 36.2% for used cars - but the used cars represented 17.6% of those dealers' gross profits, as opposed to just 4.0% for the new cars.

The greatest proportion of gross profit comes from service charges -

31.3% from just 6.7% of the companies' sales volume. But this actually represents a decline over previous years, partly because of longer service intervals and partly due to competition from independent garages.

Similarly, the franchised dealers are suffering with their new car sales because of the growth of car supermarkets, which can undercut their prices for new models.

Trend Tracker notes that some franchised dealers - notably Lookers and Arnold Clark - have responded by selling used cars on dedicated separate sites, and that more are likely to follow. Trend Tracker also predicts that existing independent stores are likely to be acquired by dealer groups over the next few years.

From 1999 till 2005, the fastest-growing used car brand in the UK has

been Lexus, with an increase in sales of 401%. Lexus is followed by Kia (317%), Alfa Romeo (202%) and Skoda (140%), while Mercedes-Benz, Jeep, Audi, SsangYong, Subaru and Porsche have all improved by over 100%. Used car sales of Ford, Volvo and Proton models have declined by 11%,

12% and 20% respectively.

All this information - and much more - is available in Trend Tracker's study, The Future of the Used Car Market 2006-2011, which is priced at =A3795. More information can be found at

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Reply to
greek_philosophizer
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Makes me think of cameras, printers and the like. Not much money in new-model sales.

DAS

For direct contact replace nospam with schmetterling

Reply to
Dori A Schmetterling

I don't get it. Usually the used cars the dealers have for sale are the ones they received when they sell a new car.

Reply to
John

I don't believe that's true , around here ( metro Detroit ) area , car dealers buy a lot of cars through auction . Lease turn ins amount to a great deal of their used car inventory. That why you see so many 3 year old cars with 30 to 36000 miles on them. -Dana-

Reply to
Dana

Most of the profit on new vehicles is realised in kickbacks for hitting sales targets, say a particualr dealer had been told by Mercedes, this month you have to sell 45 C class models, if you manage to hit the target there's a £1,200 bonus per vehicle sold in kickback commssion direct from the factory.

So the dealer gets to 40 units and close to the end of the month, they'll pre register another 5 vehicles to hit the bonus, effectively buying them themselves then putting them on the forecourt as ex demo, or using them as demo vehicles.

Then as already suggested most of the two and three year old vehicles are generally lease exchanges. It's very unusual here in the UK for dealers to actually sell part exchanges on the the forecourt of the garage that took them, unless there is something exceptional about the vehicle.

Alan M

Reply to
Alan Mudd

Yes, exactly so. There is more flex. and hence more margin in used items.

Reply to
Martin Joseph

New vehicles have a fixed price from the factory and a limited margin potential as the retail price is well known.

Used cars can be bought for very little (or taken in trade), and then sold for much more.

Reply to
Martin Joseph

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