Amplify Franchise Earnings with Used Cars

Todd GundersonLast week, NextGear Capital’s DVP of Franchise Major Dealer Todd Gunderson presented a webinar in conjunction with Automotive News titled “Amplify Your Earnings: Increase Profitability and Growth Through Used Inventory Financing. This webinar, which targeted franchise dealers, provided information on how used car sales can positively impact a dealership’s bottom line.

Additionally, Todd addressed the differences between OEM and non-OEM finance providers and why franchise dealers should consider non-OEM finance providers to help them acquire their used inventory.

Here are the three main takeaways from Todd’s webinar:

1) Auto industry remains strong
It’s been a great year for both dealers and auctions – and it could end even better! As we approach the close of 2015, NADA predicts franchise dealers will sell 31.77 million new and used vehicles by year’s end – an increase of 3 percent from 2014. And of that number, 14.6 million are expected to be used vehicles. Additionally, Black Book reported a 0.7% price decrease year-over-year this past June.

One area to keep an eye on is higher rates of deprecation as we look ahead to 2016 and beyond. According to Todd, a greater supply of used vehicles, weak credit conditions and new-vehicle pricing pressure could all impact depreciation rates.

2) Used Cars bring $$$ to Franchise dealers
According to Manheim, 42 million used cars were sold in 2014, which equates to over 2.5 percent more than new cars. And while dealership margins fell for a fifth straight year to 13.1 percent, used vehicle sales accounted for 31 percent of franchise dealership sales dollars in 2014, second only to new vehicles.

Used car sales also have an impact on other areas of dealerships. Todd spoke in his webinar about a recent NADA report that shows as franchise dealers increase their used sales velocity, there is a correlated gain in the dealer’s F&I and service/parts department as well.

3) Non-OEM financial providers = more flexibility
In the last part of his webinar, Todd focused on the differences between OEM and non-OEM financial providers. One of the key differentiators between these two are the amount of flexibility dealers have when it comes to inventory. According to Todd, OEM financial providers are more prone to place mileage and age restrictions on vehicles that can be floored, while also being more loyal to the product than the dealer.

However, non-OEM financial providers know no such restrictions. Not only do non-OEM financial providers allow dealers to maximize cash flow, but dealers also have the ability to finance from multiple buying channels, including auction purchases, trade-ins, wholesale units, dealer-owned inventory and private owner purchases. Additionally, dealers can finance from these different channels with no mileage or age restrictions.

To view the entirety of Todd’s Webinar, click here.