Selling used cars can be a lucrative business. But it’s not easy. According to the U.S. Bureau of Labor Statistics (BLS), 20% of new businesses fail during their first two years, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.
At the same time, the U.S. used car market was valued at $195.84 billion in 2021 and is projected to reach 302.47 billion by 2027, registering a compound annual growth rate (CAGR) of 7.51% between 2023 and 2028. So there’s a lot of money to make in the used car sales business.
Becoming a successful used car dealership requires careful planning and strategy. There are a lot of moving parts to the business.
So whether you are starting a new dealership or pivoting business strategies due to disruptions like the COVID-19 pandemic, this article is for you. In it, we’ll go over five secrets to running a successful used car dealership:
- Create an online presence
It’s no secret that most shoppers start their search for a new car online. According to Google, 95% of vehicle buyers use digital as a source of information. That’s even more true for those buying used cars.
This means your car dealership needs to have an online presence to attract potential buyers and capture their attention. Start with an attractive and user-friendly business website that shows your current car inventory. From there, you can also invest in online advertising and marketing.
- Focus on great customer service
As you build your client pool, prioritize excellent customer service. This includes taking time to understand your customers’ pain points, needs, and wants.
Don’t be too pushy since this can be a turn-off. If you show that you genuinely want to serve the customer, they are more likely to lower their guard and let you help them.
You can also offer buy-here-pay-here (BHPB) financing to those who need it. According to Tiger Okeley at BHPH dealership Oak Motors, “Providing in-house financing is a great way to help younger and first-time car buyers who may not qualify for a traditional car loan. It’s a great value-add that many of our customers love.”
The same goes for warranties and service contracts. They add extra value and help you win customers’ confidence and trust.
Whatever you do, be transparent, friendly, and responsive with your customers. You’ll make more sales in the long run if you do.
- Acquire the right vehicles
In the used car industry, your business success depends on how efficiently you can acquire, recondition, market, and sell cars. You can find good deals on used cars at local auctions and from wholesale suppliers. Try to build strong relationships with contacts in these areas so you can secure a steady stream of car supply.
Use data and predictive analytics to find out what cars are most popular in the areas and among the demographics you are serving. But try to diversify your inventory, too, so you can appeal to different types of buyers. That probably means getting some low-end cars and some high-end ones.
- Follow a rigorous car inspection process
Before acquiring each car, make sure to inspect it thoroughly. This involves reviewing the vehicle’s history report and having a professional mechanic look at it. Then you can avoid passing any lemons on to your customers. It also helps you know how to price vehicles accurately and competitively.
- Create an appealing showroom
Finally, it’s important to create an appealing showroom to showcase your inventory. The showroom should be clean, well-organized, well-lit, and secure. The goal is to make a great first impression and create an environment where visitors are motivated to buy.
To make this happen, you must invest in the proper real estate, interior design, signage, and regular cleaning and maintenance.
Adding it all up
Ultimately, used car sales can be a tough business. But with careful planning, strategy, and execution, you can build a dealership from the ground up that outlasts the competition. Start small by implementing and sticking to the tips above.