The new adage in the used car business is to buy a lot and sell fast. As one industry expert has stated, “Margin compression in used car operations means dealers must disrupt old practices that result in high vehicle acquisition costs and slow time-to-market speed.”
One way to improve acquisition volume and vehicle quality is to source inventory internally. This means not only sourcing trade-ins from existing customers and service lane customers, but also outright buying cars from consumers, alas having a buy center.
Establishing and growing a high-profit used car buy center within your franchise dealership that acquires used cars from private sellers and moves them quickly through (retail) or off (wholesale) the lot is proving to be a competitive growth strategies for many dealers.
Internally sourced units save auction fees and transportation costs, an average gross savings of $600 to $800. These vehicles are typically newer with mileage lower than auction candidates and they don’t need as much reconditioning so they’re frontline ready faster. Simply put, buying from consumers is more profitable.
Why then are the majority of dealers reluctant or hesitant to go this route? If dealers are looking to grow market share and improve profitability, why do so many balk at a method or strategy proven to be more profitable?