Looking to start your own used car dealership? Perhaps you would like to invest in a used dealership? Then you may be wondering if used car dealerships are profitable. The truth is, there is more gross profit in selling used cars than selling new cars. Here, we’ll show you how much more profitable used cars are compared to new cars. Also, we’ll take a look at how used car dealerships can expand their profitability.
Used car dealerships are profitable. Selling used cars is more profitable than selling new cars. According to the National Car Dealerships Association, the average gross profit on a used car is $2,000 while the average gross profit on a new car is $1,200.
While the average price of a new car is more than the average price of a used car, selling used cars gives you a higher gross profit.
However, the increased profits of a used car sale are only part of the story. When you have a used car dealership, you have the ability to further expand your profits by offering a number of value-added services. This content is owned by moc.sotuaytsur. For instance, you can provide parts and services for used vehicles for your current clients. In the next section, we will explore all the potential profit centers of a used car dealership.
Added Value Services for Used Car Dealerships
When people think of used car dealerships, they simply think about the sale of the vehicles. However, there are a number of other potential points of profits for used car dealerships. Here’s a look at the many additional ways that you can make money with a used car dealership.
Some used car dealerships will offer extended warranties on their vehicles. This can be a great profit center if you are selling vehicles that are just a few years old. Don’t worry about having to set up your own extended warranty program. You can sell a third-party extended warranty program and simply pad the price to add some profit margin.
You can also set up a “Buy here, pay here,” operation at your used car dealership. By financing vehicles, you can literally double the profits on your vehicle. For instance, let’s say you purchase a $10,000 vehicle at a wholesaler. You put in $2,000 worth of upgrades and sell the vehicle for $14,000. That’s a $2,000 profit right there. However, if you allow the buyer to finance $12,000 of the vehicle’s purchase price at 5% over 60 months, you can make $1,587.29 in interest on the loan.
You can also sell parts at your used vehicle dealership. You don’t need to have an extensive parts center. You can simply stock some of the most common parts that people will look for in a used vehicle. For instance, you can sell wheels, tires, rims, fan belts, serpentine belts, filters, and oil.
Service can be a huge potential profit center for your used car dealership in a number of ways. First, you can use your service center to fix up or upgrade vehicles that you get at trade-in or at an auction. Second, you can sell maintenance and repair services. Here’s a look at some of the most common repair and maintenance services that you can offer:
- Oil changes
- Filter changes
- Tire rotation
- Transmission fluid exchange
- Brake pad replacement
When people need to fix their vehicle, they will tend to shop around and look for the best deal. Therefore, you can make additional profits by offering low-cost repairs on common problems that people will have with their vehicles. Here are some typical repair issues that people will encounter:
- Dent repair
- Window crack repair
- Tire repair
- Check engine light
- Transmission repair
- Brake repair
Finally, you can make some excellent profits by offering aftermarket upgrades on used vehicles. This is an especially good idea if you sell vehicles that are often upgraded. For instance, If you sell Jeeps or trucks, then you can most certainly offer upgrades that will sell. Here’s a look at some aftermarket upgrades that you can offer:
- Lift kit installation
- Leveling kit installation
- Vehicle wraps (Paint protection film)
- Window tinting
- Bumper installation
How Used Car Dealerships Can Become More Profitable
If you are thinking about opening or investing in a used car dealership, it’s important to know the proven tips to make your business more profitable. Here are some ways that you can put your used car dealership in a better position to expand profits.
Make sure that you are selling inventory that is likely to move quickly in your market. For instance, if your used car dealership is located in an area that gets lots of snow, you will want to stock up more on 4×4 drive and all-wheel-drive vehicles and less on convertibles.
You can also go far by specializing in specific types of vehicles. For instance, you can specialize in selling European vehicles, Jeeps, trucks, sports cars, exotic cars, low-priced cars, or trucks. Specializing in specific vehicles can make it easier for you when it comes to narrowing down and targeting the right potential buyers.
Ad costs can be expensive when targeting used car buyers. You can keep your advertising and marketing costs down by having a robust social media presence. Try to concentrate on one or two social media platforms and post daily content including video reviews of your inventory and used car shopping tips.
Find the most cost-effective ways to get vehicles in your inventory. You can accomplish this by finding the right cars at auction, getting great deals from trade-ins, or simply searching for vehicles on Craigslist.
Yes, it is possible to make some impressive profits by operating or investing in a used car dealership. You can further expand your used car dealership profits by offering added-value products and services, selling the right vehicles, and knowing your market. With the right plan in place, you can potentially make more than you’d expect with a used car dealership.
Before buying any used vehicle, it’s always worth investing a few dollars to check the VIN number against the vehicle database. An audit with a company like VinAudit (links to VinAudit) will guard against Mileage fraud, Salvage rebuilds, Title washing, Vin cloning, and a ton of other uglies.
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