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Car dealers should focus on used car stock turn, not profit margins

The chart, below, shows the trend in both the actual achieved gross margin and the profit per forecourt space per week for typical B and D segment cars.

Glass's stock turn graph   
   

Notably, despite a broadly flat gross margin, the financial return on the B segment car to the dealer appears to have declined by about 40% over the course of 2013, from a rate of over £500 to just under £300 per forecourt space per week for a Ford Fiesta Zetec petrol as a consequence of a steady lengthening in the time needed to secure a buyer for such a car, most likely caused by the plethora of great new car deals for private buyers in that segment.   

By contrast and despite greater volatility, a typical D segment vehicle did not show the same level of decline, with a gross margin potential for a Vauxhall Insignia Exclusiv remaining around £600-£700 per week throughout 2013.  However, “hidden discounting” through retail PCP deals has been less aggressive in this segment.

It appears that dealers are unaware that the level of profits from certain vehicle segments has been in decline, and many have not adapted.

 This really brings into question what a dealer should be stocking; however, it will be necessary to stay ahead of the game as once enough dealers make the connection, prices and selling days will become less attractive as retail supply increases and consumer demand shifts elsewhere.  

Without the right data and systems, there is a real chance that the less informed dealer will be left with only the weaker opportunities.



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Comments

  • sgcb - 29/05/2014 14:51

    THOSE WHO CAN,CAN! THOSE WHO CAN'T TEACH

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    • Trooper - 07/06/2014 08:54

      @sgcb -

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    • Trooper - 07/06/2014 09:00

      Also those who CAN and HAVE ......PASS IT ON it called passion....bitter ay we?

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  • Peter piper picked a pepper - 29/05/2014 16:58

    Lol

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  • Jim Reid - 29/05/2014 21:43

    The motortrade is a much more complex place than Dr Richard points out! There are so many variations of what to buy why you buy it and the reason for buying it at that price! Data is just that, historic numbers that should be collated to help dealers make more profit rather than patronise them by posting such a simple sweeping statement ! Profit is king and without it nothing grows, maybe Dr Richard should spend a little time with dealers to fully understand their situation and reasons for their chosen stock! Data is a tool that should be used alongside experience of the local marketplace. Turnover is an important part of the complete picture but not the only part!

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  • Passerby - 01/06/2014 10:03

    So.... Turning all your stock at 0 margin every month is the key to success? Well done.

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  • Paul Chitty - 02/06/2014 21:12

    You cannot take your eye off either. What about F+I, staff costs, number of deals, CSP ? You cannot have a great stock turn if the cars have too little margin or you'll be a busy fool and soon a bankrupt one !

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  • Matt Smith - 11/06/2014 08:13

    Great article

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