At GSA we track benchmarks through our involvement with dealer groups, such as the Best Operators Club. The group’s by-laws require members provide accurate dealership operations data on a monthly basis. This group has kindly consented to let us share the numbers we are getting from our data reporting system. This column explores the current sales department pre-owned unit benchmark data.
The following graphics depict actual December ’07 pre-owned sales numbers for one of our dealers. This is a fair-sized, multi-line dealership located on the outskirts of a sizable metro market. This dealer does not do any pre-owned sales outside of motorcycles. You will see the TBOC numbers for other pre-owned products, so this will provide you with some benchmark data for comparison.
This dealer sold nine pre-owned motorcycles in December and 379 total for 2007. He has 81 pre-owned units in inventory. This may be a bit high due to the slow sales last fall, however he is also about to go into the peak-selling season. This represents less than a 90-day supply, so an acceptable four turns or more in 12 months is possible. His new motorcycle sales for 2007 were 846 units (out of 1,663 for all products). This gives him a pre-owned-to-new sales ratio of .45 to 1, or just over two new units sold for every one pre-owned, which is quite good. While some dealers who really focus on pre-owned sales shoot for two pre-owned to one new or better, a good goal is at least .5 to 1 (2 new to 1 pre-owned). Why is this important? Because pre-owned units present additional sales and profit opportunities for your dealership. Here’s a few reasons why used sales just make sense:
CY: current year
PVS: per vehicle sold
COGS: cost of goods sold (only includes shipping and make-ready for the units sold)
TBOC: average of the top five BOC members in this category
- High margins of 20% plus are not unusual you control the cost of the units.
- Reduces competition its hard to compare pre-owned units at other dealerships.
- Creates additional sales for F&I products, P&A and service.
- Taking trade-ins leads to increased new unit sales.
- Attracts different (read new) customers.
In the first chart we see that the dealer’s margin on the nine pre-owned for December was only 12.6%. In addition, the COGS PVS is very high ($1000+ per unit over YTD average). Operating profit was a negative number because overhead marched on while volume decreased (high expenses PVS). This all indicates the dealer did what was necessary to close deals on some high-cost inventory. Note that for the year, he maintained an outstanding margin of more than 20% on his pre-owned. If he had not held the line on prices for most of the year, he would have been in a world of hurt when the time came to take a hit to move some units!
|Pre-Owned Sales & Expense Totals|
|Sales||COGS||Gross Profit||Margin||Selling Expense||Pers Expense||Admin Expense||Facility Expense||Oper Profit|
|2007 TBOC PVS||5,318||4,371||947||265||276||131||118||157|
In Chart #2 we see that his 20.4% YTD margin stands up very well to the TBOC number of 18.2%. This is a very profitable dealer with a sales staff that works hard to maintain margins. The rule is "every deal stands on its own." Your sales staff has to work every deal for maximum profit. This same effort also has to be applied to getting your share of P&A and F&I add-on sales for every unit.
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|Product Category Gross Profit Detail|
Notice the kind of numbers that the TBOC gets on other pre-owned products. When compared with new unit margins, pre-owned units present a sizable profit opportunity. It is worth your time and effort to pursue, promote and grow this important part of your business.