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Focus on profit per unit, dealers told

Dealers need to concentrate on profitability per unit as the stock of available used cars in the two-three year old age range starts to shrink, says RAC Warranty.



It believes that signs are appearing of the impact of the sharp fall in new car sales seen since the start of the recession – resulting in fewer used cars of this age appearing at auction and through other sources.


Ian Simpson, sales and marketing director at RAC Warranty, said: “This is something that has really started to happen over the last few months.

"New car sales started to fall off in 2008 and, two years down the line, we are seeing an inevitable reduction in the number of cars of this age available.


“This has all kinds of effects on dealers.

"The choice facing them is reduced, prices are inevitably higher and, ultimately, it means that dealer will be selling fewer units, certainly in this kind of age range.”


This shift means that dealers need to think hard about per unit profitability, maximising the return from each vehicle sold.


He said: “Dealers need to look at each vehicle, ensure that it is prepared thoroughly to make it as attractive as possible in order to justify the windscreen price, and ensure that the profit potential of aftersales products is fully explored.


“Aftersales products are very much the key to maintaining overall levels of profitability when unit sales decline. Dealers need to ensure that they have a structured sales process in place covering everything from GAP protection to warranty sales.”


Simpson added that RAC Warranty was continuing to see customers buy upgraded warranties, indicating that many of the worries prompted by the recession were still very much being felt.


He said: “Used car buyers are still hearing bad economic news on a regular basis, even if it is improved from a year or so ago.

"They value the reassurance of safety net products such as warranties while they also remain an important source of profit for dealers.”


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