Ten Tips on How to Maximize Used Car Dealer Profits

Find out how preowned car dealers can max out their profits during the pandemic.

Used cars are HOT right now. Because of the pandemic and resulting financial crisis, more people than EVER are purchasing preowned vehicles.


Because of this, many dealerships are experiencing an inventory crunch which is cutting into their profits. They’re selling more, but earning less on each sale. If you’re experiencing this, here are our top ten tips for maximizing used car dealership profits now and once the pandemic is over.


1. Play internet offense, not defense.

Many experts believe the internet has ceded all control over used car sales to buyers. With the ability to comparison shop online, buyers are able to easily find the best deals on the models they’re interested in. In other words, it’s put shoppers in the driver seat and dealers in the back seat.


The truth is that dealers don’t have to take a defensive position when it comes to online sales. Instead of thinking like a dealer, put your shopper cap on. Market your vehicles online with the ultimate buyer in mind.


Shop the websites of your competitors daily. Look for gaps in their inventory that you’re able to fill. Use this information to figure out which vehicles to feature on your site — especially ones that you are able to charge a premium for because of a lack of local supply. In today’s dynamic marketplace, you have to be nimble to stay ahead. It’s no longer enough to take a passive approach to managing inventory and marketing. You have to be willing to get into it — and battle it out — every single day.


2. Shift your auto buying strategies.

Have you been buying a lot of your inventory at local auctions? It’s the case with most dealers and has been for a long time.


The reality is that the recent run on used car dealers has turned things upside down. All the dealers in your area are now bidding against each other for the same vehicles. As prices go up, margins go down. In some places, it isn’t worth shopping the auctions any more.


If you’re experiencing this, it could be time to shift your vehicle acquisition strategies. Focus more on buying direct from car owners and making the most of trade ins. In most cases, getting cars this way will provide you with more room to earn a profit on them.


3. Offer profitable add ons.

Why not leverage your finance department to increase the profit you earn on the used cars you sell? If you plan things correctly, you can earn a few hundred dollars more on each one with add ons like auto financing, extended warrantees, service contracts and insurance. If you structure things correctly, you could increase your profit margins by several percentage points.


Make sure you train your finance team members and sales reps on how to up sell these things properly. You never want customers to feel like they’re being taken advantage of to up your profits. Instead, make them feel like you’re offering them added services that will benefit them at a fair cost.


4. Improve your reconditioning process.

It may have been a long time since you took a fresh look at how your dealership reconditions cars.

  • Are there steps that could be eliminated or speeded up?
  • Could there be newer methods or technologies that will allow you to get things done faster, more efficiently or with fewer people?
  • Will touching up the paint or making costly fixes really pay off in the end?

When it comes to increasing margins, every little bit counts. The faster and more efficiently you can make a vehicle available for sale, the quicker you will be able to earn a profit on it. And that profit will be higher!


5. Partner with a new car dealer.

Is your used car dealership affiliated with a new car one? Partner with them to take advantage of cross sell opportunities. Many people who shop for new cars end up buying a used one instead because of cost and other factors. Some who stop by to look at pre-owned cars might express an interest in newer models.


Make it easy to refer customers between the operations. This is a particularly beneficial practice for used car dealers because more people decide to buy used cars after shopping for new ones than the other way around. It could attract a lot more traffic to your dealership with little more effort than simply returning the favor. And new car shoppers who end up buying used will feel they are getting a bargain.


6. Encourage browsing.

Some dealerships discourage less-than-serious shoppers from just hanging out. It’s viewed as a waste of time for their salespeople. The truth: Most of these people will turn into customers within the next few weeks or months. Few people actually waste time at used car lots. They’re really educating themselves about a future purchase. (The same is true of online tire kickers.) Offer anyone who shops your dealership online or in person an incentive such as a discount, free enhanced warrantee or complementary service package. It will make it more likely they’ll come back when they’re ready to buy.


Tip: Whether someone is shopping online or in person, make sure you get their contact information before you offer an incentive. Being able to stay in touch helps ensure prospective buyers will return to your dealership.


7. Adjust the pitch to the customer.

Want to make it more likely shoppers will buy from you and maybe pay premium prices? Train reps on how to adjust their sales tactics and tone to match buyer expectations. Look for clues from the shopper about the kind of support they need. If they’re asking a lot of questions, make sure the salesperson stays with them to provide answers and doesn’t get distracted or try to serve too many customers at once. If someone is just browsing, give them space and time to look around. Even if they don’t buy from you right away, it’s more likely they’ll return if they enjoy their experience online or on the lot.


8. Encourage buyers to take advantage of your maintenance department.

Maximizing the profit on a vehicle doesn’t have to end when it leaves the lot. Encourage your customers to service their vehicles at your shop. Send them coupons and discounts whenever it’s time for a tune up or tire rotation. Every time they come in for a service call, you increase the profit on a sale.


9. Be honest and transparent.

Nothing is worse than having a buyer get excited about a vehicle they view online only to be disappointed when they actually see it on the lot. It completely destroys trust in the dealership. Never use doctored or misleading photos on your website. Always disclose issues with the cars you sell. This will help prospective customers trust you and make it less likely they’ll try to negotiate down prices if they understand the true condition of a car from the beginning.


10. Encourage positive ratings and reviews.

No matter how much of the used vehicle buying process moves into the virtual realm, it’s still all about reputation, reputation, reputation. That’s why it’s important for you to ask happy car buyers (and service center clients) to complete online ratings and reviews. Make the process easy by including links and instructions in an email. Consider incentivizing it by offering a gift card (maybe one to try out your service center, which will provide a double benefit to your business). Ratings are often the first thing buyers check when they think about shopping a dealership. It’s also the final thing they consider before closing a deal.


If you do only ONE thing to increase the profitability of your dealership, commit to a ratings and reviews program. It is a sure way to building buyer interest, confidence and trust in your dealership.





Ready to get started?

Contact us for more information.