With the transformation of the automobile market from the incremental market stock market, for new car dealers, it has become a thing of the past to support the development of enterprises simply through the profits of new car sales, and the second-hand car business has gradually become an important way for dealers to expand new car sales and a new profit growth point. U.S. auto dealers have proven the importance and profitability of the used car business in the car dealership business chain through decades of development.
First, what kind of replacement car to do batch sales. For every 100 new cars sold by U.S. car dealers in the United States, about 80 are replacement vehicles, which is also the most direct source channel for new car dealers. Among the 80 replacement vehicle sources, about 60 are the same product vehicles, and 20 are non-native vehicle sources, and the traditional practice is to sell these 20 non-domestic vehicles wholesale through online and offline auctions, dealer replacements, etc.
Second, used car retail is heavy on quality. The 60 identical vehicles will be prepared and sold next. There is a saying in the United States that "there are three ways to understand whether used car sales are profitable or loss-making, how much to buy, how much to sell and how much to spend on maintenance." In the United States, it generally costs hundreds of dollars to renovate vehicles, including cleaning the appearance of the vehicle, interior, changing tires, simple repair of the surface and engine maintenance. The vehicles will also be sold in the used car exhibition area of the new car dealership store. Over the past 20 years, new car dealers have also continuously upgraded their used car showrooms, especially after the used car chain CarMax entered the used car industry, new car dealers have paid more attention to vehicle condition and customer service.
Third, how to improve the old-new ratio. New car dealers are targeting a 1:1 ratio of new car to used car sales, for the simple reason that gross margins are much higher than new cars. Suppose the average sales price of a new car is $40,000 a piece, and a used car is $20,000 a piece, but the profit margin of a used car is twice that of a new car. So how to increase from 60 to 100 vehicles? There are several ways, first of all, the dealer will dispose of the source of the product with other brand dealers (the so-called brand exchange). Secondly, the buyer will also acquire the source of the product from the auction channel and the individual seller channel and publish the acquisition advertisement on the homepage of the dealer's website, so as to strive to achieve the goal of 1:1 sales ratio, after all, the brand dealer knows the most about the brand he operates and is the most professional.
Fourth, U.S. tax policy encourages used car replacement. The consumption tax difference system is implemented in most states in the United States. When a consumer buys a new car and replaces the old car, the consumer only has to pay the consumption tax on the difference between the new car and the old car. That is to say, the difference between the sale price of the new car minus the replacement price of the second-hand car is levied, which greatly reduces the tax payable by consumers and greatly increases the replacement rate of the new car dealer. After-sales financial services have also provided greater support for the improvement of the profit margins of new car dealers, part of which comes from new car loans, and the other part comes from used car after-sales maintenance prepaid service solutions.
Fifth, CarMax changed the perception of new car dealers selling used cars in the United States. Let's take a perhaps extreme example. In the United States, for a long time, used cars have given the impression of being the choice of relatively low-income people, the used car market is mixed, and if you choose to buy a used car, there is a high probability that you will be deceived. The rich only choose to buy new cars, and if you run a used car business, you are also considered a second-class dealer and not favored by the new car dealer group. Because new car dealerships are decent and high-class professions. But when the CarMax used car brand chain appeared, it proposed a new concept for the used car industry, and used cars could also be accepted by the rich. CarMax's construction of a unified standard store, exquisite decoration environment, exquisite car condition, one-price sales and no reason to refund and other services have changed the impression of used cars in people's minds. The relatively higher profits of used cars have made new car dealers see business opportunities and pay more and more attention to used car sales. Used cars are also becoming more transparent and increasingly reputable. In 2000, the ratio of new car sales volume to used car sales of new car dealers was about 2:1, and by 2020, it will basically reach 1:1. In the United States, new car sales are about 16-17 million units a year, while used cars are about 40 million, so new car dealers in such a large market will definitely have a place.
Whether it is a new car dealer or a used car dealer, it is also for the market and consumers. Benign market development and a good market environment will surely bring a more favorable consumer environment to consumers, and also bring higher profit margins to dealers.
The mainland used car market has entered a rapid development cycle, and it has become the consensus of the industry that new car dealers carry out used car replacement. How to promote the fair, just, transparent and orderly development of the market more efficiently is also a problem we face. The China Automobile Dealers Association will, as always, strive to promote the development of the used car industry.