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How dealers can increase profits from their used car operations

Stock Profiles: The Changing Dynamics of the Wholesale Market

Dealers should question their stock profile to ensure the mix on offer is not being skewed to nearly new models by pressure from manufacturers to hit targets, according to BCA managing director Spencer Lock.

 
   

Lock urged dealers to pay attention to the details and refine both their new and used retail strategies to secure as strong a foothold as possible in a recovering market.

“Dealers are in a constant battle between balancing volume and margins,” said Lock. “Personal Contract Purchase (PCP) deals are driving the new car market and that is likely to have a knock-on effect on the used market.

“If you’re looking at £299 a month on a new car, what does that make a 12-month old used car look like?”

He believes dealers are under pressure from new car targets and that means dealers’ stock can become unbalanced.

“If more than 11% of a dealer’s used car stock is up to two years old, I believe the mix is incorrectly skewed towards new car market targets and pressure,” said Lock.

“A 1.5-to-1 ratio from used to new cars is a good achievement for dealers, but businesses should really be targeting 2.5-to-1.”

The latest ASE figures show the ratio of used cars to new cars in August 2013 was 0.91-to-1.

Next page: How efficiency impacts the used car market

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