Lately I’ve talked to several dealership groups that are trying to boost their used-to-new-vehicle sales ratio. The magic numbers are one to one -- one used car sold for every new car sold.
Sonic Automotive hit that ratio in the second quarter, making two quarters in a row at that level. Sonic executives now want to do even better. Asbury Automotive and AutoNation Inc. both are pursuing one-to-one ratios
Dealerships typically make bigger profit margins on used vehicles. A bigger used-car department also can help service revenues as those vehicles are more likely to come back for repairs.
Asbury’s 121 initiative is designed to achieve a one-to-one ratio. That would be an increase from its second-quarter performance of 0.7 used vehicles sold for every new one.
To go beyond today’s performance, Asbury is requiring its stores to hang on to trade-ins with more age and miles on them than they would have kept in the old days. “They are very retailable products,” Asbury COO Michael Kearney recently told me. “We don’t have to worry as much about some market shortages of used vehicles because we will keep trades we previously would have wholesaled.”
That’s a popular strategy. At AutoNation, “we’re trying to retail everything we can,” COO Mike Maroone said. “We’re keeping vehicles we once otherwise would have wholesaled.”