Dealers Biggest Mistakes
Seeing Wholesale as a Low Priority
Wholesale is an integral part of every new car stores business plan and if it’s not, you’d better make it one.
The last time I checked, the car business is still a cost-plus business. There is no dealer that I know that isn’t either constantly seeking ways to increase margins, both front and back or trying to find ways to lower expenses. In any business, the number one priority will always be financial. This is not a cynical view, it is how the world works, businesses are run to make a profit. Focus on how you can increase your wholesale margins and increase your dealerships bottom line.
Selling Off the Back Patio to a Wholesaler
This is a “Sales 101” type of mistake, but it’s one I regularly see dealers making.
Sure, removing an unwanted unit off your lot fast, getting paid before you can produce a title and not dealing with arbitration sounds like a home run in the auto business, doesn’t it?
Wholesalers make their money by picking up the spread between what a dealer will sell them a car for and how much they can re-wholesale it for. Sure, they have some reconditioning costs, shipping, and auction fees, but they are still making a profit. I’ve seen wholesalers using apps to market cars while they are still on the dealers lot and selling them before they have even written the check.
With all the streamline selling processes that are available today making it faster for dealers to liquidate unwanted inventory, why would we want to limit our wholesale margins by selling to a wholesaler. Properly utilized, many digital apps allow sales staff to value and in some cases, already wholesale customers trades to a larger wholesale market before the ink is dry on the new deal.
There is a reason wholesalers have been in this business just as long as the oldest dealers that they are buying from. No wholesaler is a dealers friend.
Choosing Wholesale Apps That Sell Features, Not Benefits
Just as your retail customers are more interested in how a car drives than its features
Over 75% of dealer inventory acquisitions in 2020 were performed online via mobile phone apps or from a PC at the buyer’s dealership. That number has grown to over 80% and will continue to climb since the closing of most physical auction locations due to the Covid-19 Pandemic.
While some of the new apps may seem to provide a convenient and seamless alternate to physical auctions, sellers need to be aware of the differences amongst these apps. Most apps boast about their features like live bidding while your sales people are working the deal or continuous auctions every 20 30 minutes. Unfortunately, many buyers lack confidence in many of the new apps due to their unclear selling disclosures, condition reports and arbitration policies and excessive transportation costs.
Furthermore, unlike physical actions that end when the hammer comes down, several of the new apps will extend the auction after its conclusion for additional time to allow the 2nd place bidder an opportunity to continue to bid. May sound good to a seller but, certainly not the winning bidder. Furthermore, some of the online apps take as many as 3 days before the high bidder even knows if he will get the vehicle, as the selling dealer may need to wait for a customer’s financing approval to solidify the deal in order for the actual trade to be available for the buyer. I don’t know about you but, I like to know if I won at the moment the auction ends?
Not Having a Dedicated Wholesale Manager
Many dealerships attempt to master every corner of their business without venturing outward to third parties for help
I see it happen often-. Instead of employing a full time individual or contracting an experienced specialist, many dealerships rely on a sales manager to manage wholesale. The problem with this “own it all” logic is that the additional responsibility makes it difficult for managers to invest in and focus on the more fundamental, unique parts of your business, retailing more units.
If you want to have a consistent wholesale program that delivers high end results and high-end, margins then you’ll need to focus on playing to your strengths and look to start outsourcing right away to an expert in that field. Properly directed, wholesale margins can be increased tremendously once managed properly.
Final Thoughts
Certainly, these aren’t the only mistakes dealers make. So even if you don’t see yourself reflected here, don’t assume you’re in the clear. For dealer principles contemplating on how to react to the continuous selling platforms, keeping up with new technology must be a top priority. Even as they manage that reality, dealers also need to adjust how their organizations sell in the face of new customer habits and trying economic times.
In many ways, the changes in wholesale behavior are an acceleration of digital trends that were in motion before the pandemic hit. We believe we are at a digital inflection point, where auto wholesale platforms going forward will look fundamentally different from what they were before the pandemic.
Embrace the future. Contact AMP Remarketing today and let us supercharge your automotive wholesale liquidation program