Used Car Dealers vs New Car Dealers

used car lot

Confucius says: "The superior man understands what is right; the inferior man understands what will sell." No wonder he was not a businessman. A dealer is in the business of selling cars; used or new. The difference between used cars and new cars can be blurry at times, and the same applies to the dealerships as well. There are some key differences in the processes of these two types of vehicles and dealers, though.

When we say new car dealer, we mean a dealership whose inventory is comprised of mostly new cars and a used car dealer is a dealership that sells mostly new cars. Even in this simple definition, you can see that "mostly" is a matter of opinion. The ratio of used vs new cars in dealer inventories can range from one extreme to the other. Typically however, all dealers lie somewhere in between.

New car dealerships are typically franchised and obtain most of their inventory from the manufacturers. They generally focus on a few brands - a new car dealership specializing in more than 3 brands is not very common. New car dealerships get their inventory in bulk and in certain models and years. That is why they have a window of opportunity to move their inventory. This is the downside of having a new car dealership. On the other hand they do not have to worry about reconditioning, they have higher profit margins, they do not need marketing as much, they have factory to dealer incentives and they have holdback money from the factory (2-3% of the sale price of the vehicle that manufacturer sends to the dealer after the sale). Almost every dealer accepts trades during the sale of a new vehicle and cashing them is a separate process. Most new car dealers have a used car lot in the same facility or nearby and the trades are moved there. It is also possible to quickly move the trades in auctions. Nevertheless, the fact is all new car dealers are involved in used car sales as well.

Used car dealerships have a different process. They generally obtain their vehicles from two sources: auctions and trades. It is quite uncommon for a dealership to buy a vehicle directly from a customer without a trade. Auctions are typically held in various cities throughout the country. Dealers may have dedicated resources to send to these auctions or they may choose to attend to them online (something especially possible with big auction companies like Manheim). After the auction, these vehicles are arranged in a transportation schedule. It is ideal to optimize the transportation of multiple auctions in a hub. For example, dealer may be in Seattle and auctions may be taking place in New York and Texas. In this case, it may be optimal to arrange for a meet-up point in Colorado and combine them in one load from there on, depending on the transportation vendors used. Once the vehicles arrive, they need to be inspected, reconditioned and prepared for sale. Used car dealers typically have a certification process where they inspect the vehicle from various perspectives (120-point, 150-point inspection, etc) and certify the ones they determine to be solid. This may mean different things to different dealers but generally it is an additional warranty from the dealer at the sale of the vehicle. Different from the new car sales, used car dealers need to spend and work more on marketing and sales can be slightly more complicated due to added taxes and fees.

Carsinia dealer software solution is helpful for all dealers. The transportation process is applicable in both dealers which can be managed in detail with our dealer management system. Purchase and sales contracts are implemented in a way that will be flexible for both types of dealers. Other bulk update utilities, inventory loans, business intelligence reports are useful for all dealers. Since nearly all new car dealers are involved in used car sales, reconditioning process is of great value for them as well.

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