So that you don't miss it, I'll give you my recommendation right up front: get in the used car business as fast as you can.
To use dealership lingo, you should push, drag or tow yourself into this business. In good times and bad, this is a lucrative
business if managed correctly. It's the part of the business that smart new car dealerships have used for decades to keep
them profitable. And with the economy in the dumpster, many of the new car dealerships are dumping their new car business
in favor of their used car sales out of necessity.
If this becomes a trend, the former new car dealerships, and the remaining new car dealerships savvy enough to concentrate
on used car sales, are going to eat into your business. Although they'll manage a range of used vehicles, I would expect them
to concentrate on actively finding vehicles that have entered into their sweet spot for repairs. Their marketing will focus
on providing reliable and affordable vehicles that are warrantied.
In my opinion, the vehicle retailers who control the used car market will control repair maintenance and service if they treat
their customers right.
Your task will be to outdo them by finding the same kind of vehicles, just outside the late model range that you can warranty
for at least 12 months but will soon thereafter need service that you will be in a position to provide. I'm not suggesting you turn your business into a used car business, but rather to offer used cars to some degree because the
fate of many new car dealerships is dubious at best and those businesses positioned to fill the void will do so.
Things are so bad for dealerships that there's even talk about the automakers selling directly to the public, thus eliminating
new car dealerships. The system, as it stands now, is dysfunctional and inefficient. The automakers produce vehicles not really
knowing whether or not they can sell them. They make some educated guesses as to what consumers want and flood the market
with upwards of a 90-day supply of miscellaneous vehicles.
In a recent NPR report, Robert Atkinson, president of the Information and Innovation Foundation, takes this archaic system
to task. His view is that the automakers should imitate some of the computer makers who let buyers order and "build" their
own computers to fit their needs. Why have a middleman adding cost to the products?
Rightly so, he thinks this would diminish the automakers' inventory expenses, but also give them a real-time sense of consumer
demand. Having thrown this idea out there, Atkinson concedes that at present this idea isn't going anywhere because the dealers
are protected by state laws that prohibit automakers from selling direct to consumers.
With franchise laws being what they are and the political interests that are tied to them, you can't count on the automakers
selling direct. So you need to create a vehicle market for yourself in which you develop a captive core of customers by offering
vehicles as well as service for them.
Almost 70 percent of the motorists turn to independent shops for their service because they trust you, so it stands to reason
they'll buy a car from you, too.
