By Jim Boldebook, Founder, CBC Automotive Marketing
This is the fourth article Ive written in two years on the importance of franchised dealers expanding used car marketing efforts to not just survive but thrive in the coming decade. Having been in the retail automotive field for most of my life, my greatest joy has been the ability to help dealers achieve their greatest possible success.
When I started CBC Automotive Marketing in 1983, many dealer clients were selling Ford Escorts for $99 a month on 48-month contracts. The MSRP of those vehicles was roughly 25 percent of the median income. Youd be crazy to buy a used car with those metrics right? Here was a car that got almost 30 miles to a gallon, had front wheel drive, and was really a pretty solid little vehicle. Today, a similar little econo box will set you back thirty grand, close to 60 percent of the median income and to get a payment that works without a trade or big down, you need an 84-month contract!
Consider the reality in the numbers. In 1975, the median income was $12,686. A new vehicle was $3,800 — roughly 30 percent of annual income. Today, even an econo box is more than 50 percent of the annual median income and most people dont want an econo box! The more desirable CUV lookalikes (hard to tell a Jaguar from a Kia) are well over 60 percent of the median income. The hard truth is, that unless you can finance folks for the next ten years, 70 percent of America is struggling with new vehicle prices.
The need for greater balance in franchised dealer used car marketing continues to grow. For a while, the OEMs were only supporting CPO sales. Now, more manufacturers are recognizing the need for a new/used vehicle balance to keep those franchised dealers profitable.
In a recent interview, Erin Kerrigan, founder of the sell-side Kerrigan Advisors, talked about a survey of 650 franchised dealers. In that survey 86 percent of respondents said they project the value of their business to either climb or remain steady. The conclusions were that those dealers who remain highly optimistic felt the high margins of used vehicle sales, F&I, and service and parts were the keys to continued growth, profitability, and brand equity.
More and more successful dealerships are employing cutting edge tactics such as sell-from-home, where a person can get an offer on a used vehicle with just a few clicks, and the dealership will visit the owner, write a check, and pick up the vehicle.
The used vehicle marketing space is getting big spend from national operators like Vroom and Carvana hawking home delivery and satisfaction guarantees. Some of the biggest automotive public groups are opening up stand alone used vehicle operations.
If you are not solidly in the used vehicle business in the next few years, you are committing yourself to commodity sales of new vehicles for not much more than the doc fee. Its starting to look like the gas station business back in 1960 where the owners of Esso and Sunoco and Texaco were selling gas for 1 cent a gallon to bring customers into the service bays and wash racks. American franchised and independent dealers will sell 70 million cars next year. Around 16 million will be new; The rest used. Simple math would tell you that if youre not selling at least one to one, youre missing out.
What will your strategy be for increasing used vehicle sales? What percentage of your budget will you devote to the marketing effort? One of the greatest challenges to most franchise dealers is the coop addiction that has dominated and controlled advertising efforts on all tiers. The factory is not going to help you (other than CPO) with this effort.
Most importantly, who is running the Used Vehicle Sales Ship? If you dont have a strong used vehicle manager this should be your most important hiring goal in the next few months.
A really good inventory management system is also key. From the majority of those Ive talked to, vAuto is one of the best. There are also new ways to put idle inventory into the black column with programs offered by companies like Hyrecar, which rents to Uber and Lyft rideshare drivers.
About the Author
Jim Boldebook is founder of CBC Automotive Marketing, an advertising/marketing agency working with some of America’s most successful dealerships. He has been in the broadcasting, advertising and marketing fields for almost 50 years. EMAIL: [email protected]