The used car market is twice the size of the new car market. And since vehicles age and have a limited life span, people (and businesses) will always need new cars. Because of this, the supply of used cars can be expected to remain steady, if not grow, in the years to come. But with competition always increasing, securing used car profit at the dealership level must be given high priority.
Industry experts speculated that new car sales would drop in 2018 compared with 2017. They also speculated that prices of used vehicles would soften. But neither of these things really occurred, which has people wondering…will SAAR drop drastically in 2019? Will used car prices soften? Will “margin compression” still be a thing?
In a recent conversation with industry veteran Chip Dorman, he talks about these speculations. He talks about why new cars will continue to be built. Why OEMs need to design the right products, and make them profitable for dealers to sell.
The conversation then meandered into other topics related more specifically to the used car business. For instance…the idea of margin compression, and what it will take for dealers to secure their used car profits in 2019?
Towards the end of the conversation, Chip provides his top three suggestions for dealers to help secure their used car profit in 2019. He stresses the idea that dealers need to make the most of the tools (and data) available to them. He also offered up these tips:
Essentially, it comes down to working smarter, not harder. Dealerships willing to change the way they see profit both at the Big Picture and Per Unit levels will find ways to cut losses and improve inventory. We talk about these ideas and best practices often.