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July 20, 2009
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Dealers Need New Inventory Sources Competing in the used-car game means learning some new rules for formerly franchised dealers. Dealers must review every aspect of their business, from the cars they stock to the ads they run.
WELCOME to the
USED CAR BUSINESS A continuing series on franchise dealers moving into used car sales
“There are all types of new skills the dealers have to have,” said Art Spinella, president of CNW Marketing Research. Inventory presents the biggest challenge. New-car dealers have easy access to used cars through tradeins. Former franchisees now must attend auctions to fill their lots. “Just because more people go into the used-car business, that will not increase the supply of used cars nor the retail de-
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mand,” said George Hoffer, an economics professor at Virginia Commonwealth University. Inventory supply continues shrinking, with even larger shortages predicted the next few years. This will continue driving up wholesale prices at a time when those increases cannot be passed onto consumers. Dealers moving to used cars need a new approach to stocking their lots, Spinella said. Their inventory must reflect what consumers want rather the vehicles they receive in trades. This means branch out in different lines, selling Camrys and CRVs along with Sebrings and Silverados. Then there’s the matter of financing that inventory. Floor planning is scarce. The large floor planners have scaled back their available credit in the past year and several small players have gone under. Franchise dealers usually have an easier time obtaining access to both commercial and consumer credit because they have a manufacturer standing behind them. Consultant Greg Gobel said finance companies will base their decision on whether or not they work with any independents, regardless of past relationships. Some finance companies shut out national used-car chains such as CarMax Inc. because they view them as independent operators. Being technologically savvy is an advantage for most dealers coming from the franchise side, said Tim Swift, vice president of Corry Auto Auction. They’re willing to use tools like dealer management systems and purchase inventory online. (The next installment addresses the difficulty in financing retail sales.)
A BRAND NEW DAY: General Motors Co. CEO Frederick “Fritz” Henderson announces the company has emerged from bankruptcy much earlier than expected.
GM Begins New Era
General Motors Co. emerged from bankruptcy with a new name and hints of new ways to do business coming. This includes an experiment selling new cars, through dealers, on eBay Motors. The company sells certified pre-owned units on the site through a program started in 2008. There have been rumors of a major overhaul on the remarketing side, but GM executives say it will be business as usual at the auctions for now. “We like the way our program works,” said Dan Kennedy, GM Remarketing’s national sales manager. “Will there be some refinements as we go? Absolutely.” At this year’s Conference of Automotive Remarketing, Mark Mathews, GMs director of rental and used-car activities, laid out a vision for a new approach to remarketing. He described how General Motors changed all its closed sales into static events, with the cars never moving through the lanes. He advocated more changes as a way to streamline operations and cut costs. Innovations like this will continue, Kennedy said.
IN THIS ISSUE • Dealers find ally in controversial politician. – Page 3
• Auctions compete to attract shrinking Mexican buyer base. – Page 8
• The murderer of two car dealers will spend his life in prison. – Page 6
• Turning inventory is the key to increasing profits. – Page 12