Recently, I was asked to share my favorite tips on how car dealers can maximize retail and wholesale vehicle profits. The end result was the following collection of important best practices that dealers should implement and leverage in order to boost their bottom line.
First, it’s important to note that there is no tried and true rule when it comes to the perfect time to retail versus wholesale a new trade-in vehicle. However, there is one thing dealers should keep in mind: Decide quickly. Studies show that vehicles wholesaled sooner generally bring in higher gross profits. The longer a dealer waits, the more profits tend to decrease.
Choosing whether to go retail or wholesale used to be more cut and dry. Most dealers wanted newer, low-mileage vehicles for their lots. Now, believing that a good gross profit can come from any vehicle, more units are likely to be sold retail.
Inventory management programs can also be useful tools in making a choice. They give insight into which vehicles might bring in the most cash, provide local retail data or help predict how quickly a specific unit might turn. While all of this information can be found through research, specialized software can streamline the process.
If dealers do decide to keep a vehicle for retail sale, they should be sure to have a good turn policy in place. For instance, if the vehicle doesn’t sell within “X” days, it goes to auction. While each dealership is different, 30 days is usually a good guideline to follow.
Lastly, dealers should also establish a relationship with their local auctions before they actually need them. Learning about operational procedures early could make for a smoother process down the road.
What retail and wholesale tips would you add? Share your comments below.