Used car operations continue to provide valuable profit opportunities for dealers of all sizes. It is clear that finance has a vital role to play in both attracting the customer and closing the sale.
Used car finance in the UK lags behind the new sector with Dealerweb’s data showing around 46% penetration in April, a figure which marked a year-on-year increase of 2.1%.
The market still has headroom with new car finance accounting for 91% of new car registrations, according to the FLA.
The US sees used car finance penetration of 53%, and it is increasingly the norm for monthly payments to shape negotiations on the purchase of a used vehicle.
Successful used car operations can drive growth. Dealerweb data shows overall revenues from used car operations increased by 4.2% in May, despite drops in paint and GAP sales of 8.9% and 0.2%, respectively.
An attractive, used car finance rate that can deliver a low monthly payment will generate more clicks and enquiries, and ultimately, more sales.
Research by the Interactive Advertising Bureau (IAB) found that 96% of consumers research online before making a large purchase, especially when considering a new car. During this period, these prospective car buyers were more likely than the general population to be influenced by digital ads, including search and pre-roll ads.
Hitachi Capital Motor Finance undertook a study that highlighted the need for dealers to use a strong finance offer when attracting new customers. It showed that 80% of consumers said offering finance heavily influenced their decision to buy from a specific retailer, with 48% spending more as a result.
It also showed that retailers who don’t offer finance risk losing nearly 44% of customers, with 26% deciding not to go ahead with the purchase or choosing to buy from another retailer. Another 18% would have second thoughts about buying the product altogether.
Used car operations continue to provide opportunities for growth as the new car sector continues to see headwinds. It is clear that online channels are growing in importance, and it is vital that dealers capture these enquiries accurately and respond quickly.
Once the customer has enquired, they expect a quick response and data shows that a prompt response is crucial for sales conversions. Research suggests that 25% of customers expect a reply to a web lead in under a half an hour and almost half within one hour.
As dealers are continuing to see an increase in enquiries from online channels for used cars, it is vital that great value used car finance offers are integrated into marketing and sales activity. Dealerweb data shows that online enquiries increased by 4.4% in April, compared to last year.
The results of an effective used car programme are clear. JCT600 celebrated a record set of annual financial results after the car retail group’s turnover rose 2% to £1.28 billion. Used vehicle sales proved to be the main driver, with sales up 9%.
In a volatile market, it is essential that the value of every pound spent on marketing and sales is maximised. It is clear that customers are looking for great value in a used car purchase, and that is view is shaped by monthly payments.
The data shows that integrating the finance offer into a seamless customer journey from online marketing to the showroom will help to drive more enquiries and close more sales.
Author: Martin Hill is CEO of Dealerweb, a market-leading provider of showroom management systems in the UK