How to Increase Dealer Profitability Permanently Solved

After two years of record earnings, retail car dealers now have the opportunity to set up their businesses for long-term success when the market eventually returns to normal.


Here are five suggestions for boosting auto sales while sustaining long-term dealership profitability.


Preparing for a Softening in Used Car Gross Profits is Tip #1.


According to Reuters, AutoNation, Inc., the largest auto retailer in the United States, had a 47% increase in used car sales during the first quarter of 2022. The average gross profit on used car sales did, however, decline by 10%.


According to AutoNation Chief Executive Mike Manley, the business decided to clear out inventory throughout the quarter after growing worried about price and sales patterns for a few specific used cars. “We started utilizing the data we had at our disposal. In the quarter, we really aggressively corrected,” Manley said.


Chairman and Founder of VAuto, Inc. Dale Pollak also suggests reducing used automobile inventory. Pollak advises balancing used car inventories against rolling 30-day sales totals rather than the typical 45-day supply. “The time has come to temper acquisition efforts, particularly in the higher-cost sourcing channels like auctions,” Pollak said of being overstocked compared to your rolling 30-day retail total.


Additionally, it is crucial to make sure your dealership’s auction bidders are well informed of your inventory requirements.


Between April and March 2022, the Manheim Used Vehicle Value Index, which is used to gauge wholesale used car prices sold at auctions, fell 1%. Since January, wholesale prices have decreased 6.4% overall.


The pricing fall coincides with Manheim’s prediction of a 13% drop in retail sales of used cars in April compared to March, indicating declining consumer demand even as tax refunds near a tipping point.


A combination of higher borrowing rates, petrol station sticker shock, and general economic inflation deter some automobile customers from making a purchase. Although it was anticipated that a rise in the amount of tax refunds would encourage more people to acquire cars, evidence point to a slowdown in used car sales.


In the United States, sales prices are likewise on the decline. The typical used automobile sold for $27,246 in March, down from $362 in February and over $1,000 off its peak in December, according to Kelley Blue Book.


At the same time, a research from iSeeCars found that used car prices rose an average of 30.4% year over year in March. However, compared to February, when the difference was 35%, this growth is slightly less than that month.


Dealers must be proactive by diversifying their sources of income and maintaining a laser-like focus on used vehicle inventory and pricing.


Get Great Content Like This Delivered Right to Your Inbox by Signing Up for Email Updates


Tip #2: Make Your Processes More Efficient

Every organization can stand to get better. Dealerships do not stand out. By removing time and money wasters, increasing accuracy, and even shortening the sales cycle, process simplification continues to boost dealer profitability.


Let’s now explore several strategies dealerships might use to increase process efficiency in a lucrative way:


Add Prepaid Maintenance Programs


Dealers may avoid spending valuable time and resources pursuing business for the service department by offering pre-purchased maintenance plans as upsells throughout the car-buying process. It is also profitable. By converting one-time car purchases into fruitful dealer-client relationships, it promotes recurring servicing business and helps foster consumer loyalty.


Prepaid maintenance plans can be upsold by emphasizing their benefits long before the automobile purchase is signed and funded and by offering flexible payment periods and/or transferability to clients.


Pay attention to non-commission auto sales

Higher employee satisfaction and lower turnover are frequently the results of eliminating commissions from the sales process.


Salespeople who work on a commission basis have no idea how much money they will make each month. It is in the best interest of your sales crew to concentrate on selling the most costly automobiles to any and all customers on the lot because how much they are paid also relies on which vehicles they sell and for how much. While selling more expensive automobiles will boost dealer profitability, losing clients as a result of aggressive sales techniques will reduce that profitability factor.


Due to a more relaxed client buying experience, leveling the playing field with non-commissioned vehicle sales gives your sales personnel financial stability and encourages them to sell more automobiles (rather than more costly cars). The direct compensation expense for selling a car at your dealership can be decreased from $1,605 (the NADA average) to $867 using a non-commissioned strategy.


Driving Dealership Customer Satisfaction and Profits with the Modern Retail Approach >> Download the Guide


Tip #3: Make the customer experience friction-free


A quick, simple, and convenient purchasing procedure is desired by almost one-third of consumers polled by NADA Academy. That consists of a hassle-free encounter with less wait periods and more individualized treatment. Therefore, to maintain long-term success in the fiercely competitive automotive retail sector, dealers must eliminate friction from the car-buying process. Here are several tried-and-true methods to reduce friction:


Decide to use a one-price sales model.

Since its inception, Carmax, one of the biggest retailers of used automobiles, has been a one-price dealership. In the fiscal year 2021 alone, Carmax sold more than 750,000 used cars. Do you need additional evidence? The reason why so many retailers are switching to one-price selling is as follows:


Clients enjoy it more. Happy clients will purchase vehicles from your dealership and suggest other individuals to do the same.

It is more durable. A one-price approach provides more control and better certainty even in unpredictable times.

More automobiles might be sold. Dealerships sell more automobiles faster because the procedure is more effective (i.e., it reduces the number of visits to and from the desk and enables clients to sign and leave more quickly).

Check out this in-depth examination of the one-price selling model for additional information.


Take advantage of single-point-of-contact (SPOC) auto sales

While streamlining dealer operations, a single-point-of-contact sales strategy improves client satisfaction. A one-person sales procedure is known as a single point of contact (SPOC). So, from choosing and testing out a car through the financing, protection product presentation, signing, and delivery phases of the deal, one person engages with a customer every step of the way.


Customers enjoy SPOC sales methods, which are also beneficial for car dealers around the nation. The market share of 23 of Walser Automotive Group’s 27 locations throughout three states dramatically increased after the company relocated to SPOC in 2012. Read this to find out more about how SPOC can boost productivity and boost dealer profitability.


Utilize the Correct Dealership Software, the Fourth Tip


Today’s consumers have grown to anticipate higher levels of openness when making purchases of goods and services. Companies like Amazon and Progressive Insurance have been at the forefront of this movement. However, a lot of dealers find it difficult to live up to transparency demands from customers. The good news is that the correct dealership software may make a world of difference when combined with the other advice in this article. This is how:


Process Improvement for Customers from Online to In-Store

Modern consumers begin the car-buying process well before speaking with a salesman. Customers read reviews, browse dealer inventories, and look for discounts and promotions while researching autos online.


The appropriate software is sufficiently dynamic to guarantee that your website specials and digital advertisements represent the most recent price and payment details based on your dealership’s existing and incoming inventory. A fully digital retail experience is made possible by the correct software, which gives shoppers all the information they want to decide what to buy right away. The ideal software for car digital commerce also offers hassle-free financing.


F&I should no longer be opaque to customers.

The days of automobile purchasers waiting hours in an office for permission and the conditions of payment are long gone. The correct dealership software integrates many legacy systems into a unified financial management solution, speeding up and streamlining the car F&I process. Customers may sign and drive in less than an hour with the proper car financing software.


Consider this: the likelihood that the contract will close increases with process speed. Additionally, the more customers you can move through your dealership, the quicker the process will be.


Tip #5: Don’t just “set it and forget it” no matter what you do.

If you’ve planned for a softening in used vehicle gross earnings, improved the efficiency of your workflows, reduced friction for customers, and deployed the appropriate software, your dealership is set up for optimum profitability. Your staff requires training and development, though, in order to maintain that profitability over the long run.


A retailer of automobiles must make a continuous investment in training if it wants to compete on the basis of customer experience. To maintain your competitive advantage, your staff must stay on top of their game. They shape the consumer experience.


Every company, however, is distinct. SimpSocial offers software in addition to specialized team coaching and training sessions customized to meet the demands of your dealership.


Get in contact with us right now if you’re prepared to create and maintain optimum revenue for your dealership.

No leads were lost. reduced overhead.
Swipe to setup a demo
Swipe to learn more