Used cars: Maximising profit

16 April 2009

Like everything there’s a right way and a wrong way to sell used cars. Although a quick profit can be made from these vehicles they can present dilemmas for dealers.

How much to spend on preparation, whether to mix used cars with new, and customers’ expectations all need to be addressed to get the optimum price.

By following a few simple principles and with the advice of experienced people these questions are easily answered.
John McGuire, managing director of Phoenix Car Company, which won AM’s retailer of the year in 2007, said the company tends to have new cars in the showroom and used ones parked outside.

However, occasionally pre-owned vehicles are put in the showroom as well to show customers they can look as good as newer models, even after two or three years.

To capitalise on the used car market, the Scottish-based dealership, which sells Japanese models along with makes such as BMW, Mini and Kia, opened a branch in Linwood which sells part -exchange vehicles traded in at its other dealerships.

They are all former Phoenix cars so the company knows the history. It runs a strict policy which means if it’s a Japanese model it will be no older than four-years and have covered less than 40,000 miles.

For other makes the rules are less than 36 months and 30,000 miles.

This also ensures the cars are still covered by the manufacturers’ warranty which gives the customer peace of mind.

Anything outside the criteria is sent to auction, unless it is in outstanding condition.

When it comes to customers’ expectations McGuire says people like a three-year-old car to have a dealer service history and expect a good warranty deal.

Phoenix offers a free six months’ warranty although people can pay to extend this to three years which most do.

McGuire says: “Customers expect a three-year-old car to be as good as new with no major marks or damage, and there is no reason why it should not be.

“Mileage-wise we don’t retail anything with more than 40,000 miles because we want to be selling the cream of used cars.
“If it has a scratch customers want it painted, not touched up, which I think they are entitled to.”

Key facts

A used car’s CO2 figure is as important to people as the mpg
Customers expect three-year- old cars to look like new
Customers prefer a three-year-old car to have a dealer service history
Consider a separate brand or site for used cars

What’s popular at the moment?

Below are the top 10 most searched for used cars on the Parker’s website (www.parkers.co.uk) from February 2009.
It is dominated by small family cars plus vehicles from the lower medium segment. Interestingly no 4x4’s appear in the list, and the only prestige brand is BMW.