Welcome to this week’s episode of Used Cars Weekly, the original CBT News show dedicated to bringing car dealers best practices and tips for the used car department, in-depth dealer interviews, hands-on dealership strategies, as well as vendor analysis. Today, host Jasen Rice, founder of Lotpop, poses the question, is having a wholesale profit bad nowadays?
Making a profit on anything isn’t necessarily a bad thing but when it comes to wholesale, dealers sometimes believe it’s a bad thing. Rice says maybe dealers are missing opportunities on trade-ins and sales. A lot of national dealer groups like Carvana have another resource of revenue when it comes to wholesale.
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Rice poses the question, what if you can make a wholesale department? It would be no different than a buying center or service department. Some dealers may say it’s not worth the headache. Rice says, what if you buy or trade a $1,000 car, then you wholesale it for a day or two for $1,500? You just made $500 which is a 50% profit margin. He says if he was a dealer he would be going after any and every vehicle that would be available for him. With inventory shortages, wholesale revenue can be added profit.
Rice believes we are going into a slower time. Not every market customers have to buy a car. Wholesale volumes are going up. But, can you retail them for the profit margin you’ve been able to? Rice says you need to separate wholesale and retail and track your data differently. He says you have the advertising strategy and facility to write the check for the cars. Rice says don’t look at wholesale profit as a bad thing or clumped together.
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