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How dealers can increase profits from their used car operations

Despite manufacturers driving a renewed focus on new car sales in 2013, their franchised networks need to ensure their used car operations are as slick as ever.

The AM Used Car Market conference, sponsored by Autoprotect, Auto Trader, BCA, CAP and Revive, examined the improved profits available for dealers who focus on the right stock at the right price and considered how far used car values can rise before the onslaught of monthly payment new car offers negates the affordability argument. The national event, held at the Ricoh Arena in Coventry, attracted senior directors and managers from franchised dealerships, groups and manufacturers.

Below are key excerpts from the conference presentations. Readers can also view these reports in the  AM Used Car Market Conference electronic magazine.

 

Market Analysis and What to Expect for 2014

 
   

Used car prices are pushing the boundary of what consumers will find acceptable and the limit is not that far away, according to CAP operations director Adrian Rushmore.

The price of two-and-a-half-year-old to five-year-old cars has increased by more than 8% in the past year and 20% in the past four years. This is running in parallel with the Consumer Price Index (CPI), which shows household costs have gone up by 2.8% over the past year.

Rushmore said: “The used car market has enjoyed a bit of a bumper year, so things are nicely set up for 2014.

“The used car market has been improving on the basis that used cars have been affordable, but there is a price ceiling at which consumers will be able to afford a used car.

“We expect used car demand will continue to be positive next year, but there is probably a limit to which prices can move significantly further.”

Stock levels are also a concern, according to CAP’s survey of 104 dealers, with 67.3% believing their used car stocks are too low to meet demand. Despite the warnings, Rushmore did reveal how positive the industry’s outlook was about the used car market.

According to CAP’s survey, 44.2% of dealers said their sales were better than last year and 39.4% said they were running at the same rate, while just 5.8% were slightly worse than last year and no dealers were in a considerably worse position than last year.

Short-term outlook also looks positive, with 44.2% expecting business performance to improve in Q4, 51% expecting things to continue at the same pace and 1.9% are expecting a slight decline. No dealers were expecting a significant decline.

Next page: Analysing the 2013 Used Car Market Report

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