12:02 pm, November 16, 2018
Close Brothers Motor Finance supports dealers with stocking to help boost profits, says Sean Kemple.
AS WE approach the festive season, we reflect on 2018 and what has been a challenging year for the automotive industry.
There was the ‘Beast from the East’, which affected retail sales across the UK in March, two regulatory changes with GDPR and WLTP topping and tailing the summer, and of course the underlying and ongoing impact of Brexit on consumer confidence.
Whilst the full impact of some of these big industry-wide changes may not yet have been felt by all dealers, the day-to-day challenges of sourcing good-quality stock and improving profit per unit are being affected as a result.
Demand for stock increases
Sourcing stock for the forecourt has always been cited as a key issue dealers face. There’s competition in the auction houses, an increase in online auctions – and then there’s the fact that more businesses are looking to buy vehicles, thus reducing the number in the part-ex pot. It all adds up to a challenge for dealers.
However, we know from speaking to lots of dealers that they prefer this side of the business to the retailing. How many dealership owners now not only manage their businesses but also source the stock, leaving the job of selling to the people in the showroom?
Over recent months, we have seen an increase in wholesale values, with several records broken and auction houses reporting high levels of attendance both physically and online.
This demand will, of course, have an impact on wholesale prices.
I anticipate this is set to continue as we see more new cars affected by WLTP, which may result in an increase in used transactions.
In addition, we will see the large groups shift a certain amount of focus to the used market as new car retail adjusts to the challenges in the marketplace. These factors can only mean a continuation of the demand we are seeing but also a possible increase.
Sourcing stock ‘outside the box’
To stay ahead and remain competitive in this environment, I would urge dealers to focus on ensuring they have the right stock profile for their forecourt. Understanding retail pricing and consumer demand is key.
If you can buy the right stock at the right price and market it effectively, it’s a winning formula. This may mean sourcing stock outside of the traditional arenas and looking to trade-to-trade sites or private sellers on the many classified sites.
These are both great sources of stock if you know what you are looking for and the price you are prepared to pay.
Taking yourself away from the competition may give you the cutting edge!
Having a clear stocking policy will help improve profit per unit (PPU). Those dealers doing this best set parameters around profit, turn and release. Of course, marketing the vehicle effectively, understanding consumer demand and looking to additional products, such as finance and warranty, all help to supplement the PPU too.
But above all, buy it right! It all starts with the purchase, ensuring you are aware of the stock relevant for your forecourt and the potential retail price, not the aspirational retail price.
Helping dealers sell more cars, to more customers, more profitably
At Close Brothers Motor Finance, we are here to help guide dealers through the big industry-wide changes, such as GDPR and WLTP, as well as supporting you with business-level challenges, like sourcing stock and maximising profit per unit. Our account managers support dealer partners with four key areas:
Funding – Helping you fund your forecourt and meet your business objectives.
Finance – We will help you to position point-of-sale finance with your customers and assist the
training of you and your teams.
Compliance – Support you with regulatory changes and what they mean for you and your customers.
Insight – Providing you with key information around your dealership, customer profiles, stock
profiles and industry insight.
Through the above, we support our dealers in their objectives.
TOP TIPS FOR SUCCESS
• Utilise additional sourcing tools – don’t rely solely on auctions. Private ads, trade-to-trade classified sites and part-exes are all fantastic sources of stock for your forecourt.
• Have a clear pricing policy from day one.
Profit: Maximise potential profit for the first 20 days – typically 103 per cent of retail price.
Turn: Price competitively to retail the vehicle as quickly as possible.
Release: If capital is tied up in a vehicle that could be used on a more appropriate vehicle, retail out or trade out of it.
• Market the vehicle effectively. If you have a niche, sell the niche, tell the story of the vehicle.
• Ensure your digital forecourt is as effective as your physical forecourt. There are more eyeballs on your dealership online than footfall on your physical forecourt!
Sean Kemple is director of sales at Close Brothers Motor Finance, one of the UK’s leading providers of motor finance. The company works with over 8,000 dealers and provides finance for new and used cars, LCVs and motorcycles, caravans and motorhomes. Go to closemotorfinance.co.uk to find out more.
