Changing age and nameplate mix of cars and light trucks in dealer bays provide opportunities for independent aftermarket parts distributors
Fort Wayne, Ind.—Last year, new vehicle dealers in the U.S. sold over 14.5 million used cars and light trucks, approximately 0.7 million more than new models. This was the first time since the economic downturn of 2008 that dealers’ used vehicles topped new car and light truck sales.
Used vehicles provide dealers with two major profit streams, according to a new report by Lang Marketing. First, dealers earn significantly more profit when selling a used vehicle than in the typical new car and light truck transaction. Second, dealers can build their bay business by promoting future repairs to used vehicle buyers.
The following are highlights from the analysis.
Used Vehicles Replace Lost New Sales
Dealers’ interest in used vehicles was renewed during the 2008 Economic Downturn. As the new car and light truck market dropped by six million in 2009, dealers looked to used vehicles as a way to replace the loss of new car and light truck sales.
Dealers’ used vehicle sales have steadily increased over the past 13 years, and last year, dealers sold more used cars and light trucks than new vehicles (14.5 million compared to 13.8 million).
Big Profit Potential
Used vehicles can increase dealer profits in two ways. First, used vehicles provide dealers with significantly more profit per sale than the average new car and light truck transaction. Second, used cars and light trucks enable dealers to increase their service bay volume by promoting future repairs to used vehicle buyers.
Service Bays Help Dealers Sell Used Vehicles
Many dealers are increasing used vehicle sales by offering access to their bays to incentivize customers to buy used vehicles from them. This is an important step in the reciprocal dynamics that dealers are developing between their bays and used vehicles.
Filling Dealer Bays
The sharp decline in new vehicle sales since COVID-19 has reduced the number of vehicles under 5 years old. These vehicles have traditionally been the focus of dealers’ service bay sales and warranty work.
To keep their service bays active, dealers are turning to used vehicles. Dealers provide extended service hours, quick service lanes, and discounts as incentives for used vehicle buyers to return for future repairs. In addition, many dealers are bundling used vehicle sales with maintenance contracts to boost service bay volume.
Older Vehicles in Dealer Bays
Since many used cars and light trucks are 3 to 5 years old, they can generate a large share of dealer bay volume in the future. This is expanding the age mix of vehicles repaired by dealers.
Expanding Nameplate Mix
Many dealers’ used vehicle sales are different nameplates from those they sell new. Accordingly, the mix of nameplates repaired in dealer bays will expand due to their used-vehicle business.
Sell Aftermarket Brands to Dealers
Aftermarket brands enable dealers to provide competitive repair pricing for older vehicles and the variety of nameplates passing through their service bays, making dealers more competitive with independent repair outlets.
The changing age and nameplate mix of cars and light trucks in dealer bays provide opportunities for independent (non-dealer) aftermarket parts distributors to supply dealers with parts and brands that are unavailable from their OEM sources.
These changes in dealer bay volume and the brands of products they install will have repercussions for the five major distribution channels supplying the car and light truck aftermarket.
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