With gross profits continuing to get smaller, auto dealers need to start looking at their trade-in values and used vehicle operations to help their financial problems.
That’s according to a survey of more than 430 dealers late last year that MAXDigital conducted with Erickson Research.
“It’s tougher than ever to capture gross profits in today’s market, but this study shows that profits can be made by looking in the right places: trade-ins and pre-owned,” MAXDigital Executive Vice President Mike Cavanaugh said in a news release.
“To capture more gross, dealers need to treat trade-ins with the same level of importance as the front- and back-end, and make preowned a priority,” he said.
The study, conducted online in November, found that dealers are pulling in median profits between $1,500 and $1,999 on used cars, but just $500 to $999 on new cars.
MAXDigital said these numbers are consistent with what the National Automobile Dealers Association found in its 2018 NADA Midyear Annual Report.
The research also showed that 60% of dealers participating in the MAXDigital study have seen new-car profits decrease in the last two years. The average dip was $170 per vehicle.
During an interview at the recent NADA Show 2019 in San Francisco earlier this year, Cavanaugh said that on the new-car side, many dealers work on a “factory money” model.
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