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Trade Watch : Maximise yield on every car space

During the course of last year our research has revealed improvements in the professionalism and business standards of many used car operations. Much of this has been driven by the general shortage of stock which we charted throughout 2003 and is often led by the larger plcs and bigger used car specialists.

What they have accepted more than ever before is not the need to sell numbers – potentially grasped out of thin air – but the need to achieve tightness and efficiency in stock turn and yield. This has been increasingly understood by many of the dealers we research whose previous priorities – and personal reward structures – were tied only to numbers sold, bottom line profit and F&I income.

More dealers are profiling their stock because they properly understand which cars they need to own to achieve the most efficient stock turn. It is no longer sufficient to buy a car just because it is 'cheap'.

You need to offer cars to the customer base you have built, rather than take chances that people outside your customer profile will happen along to take something unusual off your hands. It might work on occasion, but as a rule the most successful operators are more interested in filling each display space with a car which will move on quickly.

Again, our research has shown an increasing number of buyers going out with a clear profile of the stock they wish to acquire beforehand. Interestingly, this has contributed to the market's stability this year. Because price – or more precisely, cheapness – has not been the prime consideration, the real professionals have been prepared to pay what is needed for the cars that will deliver the kind of retail success that ensures efficient stock turn.

Take the experience of a Proton dealer we recently researched. He has held one coupe in stock for 12 months, during which time it has almost halved in value. His reasoning for not biting the bullet and selling at a loss is simply that he does not wish to turn the loss on paper into a reality. Yet if he had done this long ago, the space this car is occupying could have delivered several sales and therefore yielded any number of profit opportunities, within reason.

Effective used car retailing is not only a function of marketing and buying and selling at the right prices. Practising efficiency and maximising the yield of every single space is the best way to give your used car business the firmest possible foundations.

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