Margins - stock turn ?

[umesh 336]

Just  read this article , not sure if everyone has see it by Glass's Guide -AM

 interesting Reading , but what do you think?

By Dr Richard Parkin

It’s a competitive world in the used car sector, but despite the more positive news that the industry is predicted to grow this year, many dealers are still too focused on used car margins and aren’t paying enough attention to stock turn.

     
  Richard Parkin, Glass's
  Dr Richard Parkin is director of valuations & analysis at Glass’s, where he coordinates the editorial and analysis team. Prior to joining Glass’s in 2012, he spent six years as a strategy consultant at Ernst & Young, with a focus on the automotive industry.
  
 

To maximise profitability, dealers should be focused on the profit made per forecourt space each week rather than on the margin made on a vehicle.

Glass’s studied a basket of vehicles over the course of 2013, monitoring the trade and retail prices in each month for a three-year-old/36,000-mile example, along with the average selling days. Astonishingly, the typical difference between trade and retail prices in any given month varied by as much as 25%, or about £500 for a typical B segment car.  However, once the average time elapsed between trade purchase and retail sale was allowed for, the actual achieved gross margin showed a more consistent picture.

Such findings reinforce our view that trade and retail guide prices need to be derived from independently moving sources of data, otherwise this true behaviour is not captured.

Why used car margins do not give dealers the full picture

The chart, below, shows the trend in both the actual achieved gross margin and the profit per forecourt space per week for typical B and D segment cars.

Glass's stock turn graph   
   

Notably, despite a broadly flat gross margin, the financial return on the B segment car to the dealer appears to have declined by about 40% over the course of 2013, from a rate of over £500 to just under £300 per forecourt space per week for a Ford Fiesta Zetec petrol as a consequence of a steady lengthening in the time needed to secure a buyer for such a car, most likely caused by the plethora of great new car deals for private buyers in that segment.  

By contrast and despite greater volatility, a typical D segment vehicle did not show the same level of decline, with a gross margin potential for a Vauxhall Insignia Exclusiv remaining around £600-£700 per week throughout 2013.  However, “hidden discounting†through retail PCP deals has been less aggressive in this segment.

It appears that dealers are unaware that the level of profits from certain vehicle segments has been in decline, and many have not adapted.

This really brings into question what a dealer should be stocking; however, it will be necessary to stay ahead of the game as once enough dealers make the connection, prices and selling days will become less attractive as retail supply increases and consumer demand shifts elsewhere. 

Without the right data and systems, there is a real chance that the less informed dealer will be left with only the weaker opportunities.

[Gavin@Rousdon 137]

The only 'data and systems' us independent dealers need is 'profit'.

 

Sometime I think Glass' Guide forget their lifeblood is independent dealers who need to know prices of a range of cars. You watch main dealers at auction and 'book' goes out the window. If they are selling the same product week in week out it's easy to know whats the right stock and what to pay.

 

I read alot of these editorial articles and rarely finish them because it seems to be a world away from the motor trade I know.

[GreenGiant 287]

Is this the same Glass's Guide that spent gazillions on a NEW VALUATION MODEL (G2, I think they called it) that would revolutionise the way we value cars?

The same fabulous system that they bought from Finland or Slovenia or Outer Mongolia (powerhouses of the Used Car Industry) and undid all of the work that had been going on for decades... and lost them thousands of customers...and many valuable employees...

...that they have now abandoned and are reverting to the tried and trusted method that worked just fine, but haven't actually told anyone or admitted the Great Experiment was an almighty cock-up.

 

I Don't think they have much credibility left for their opinions to be valid, to be honest.

Who uses Glass's Guide anymore anyway?

[umesh 336]

I must the 'only one using Glass's Guide ' Oh Plus obviously the people who work at glass's !

[GreenGiant 287]

I think you may actually be the last subscription they have, Umesh!

There was a time when the Guide was welded to my left hand and I coudn't do business without it.

Since the G2 farce, when they wouldn't listen to experienced people both in and outside their company about how it wasn't working, so I cancelled my subscriptions,

I'm still doing business. Who knew?

[Gavin@Rousdon 137]

I still use Glass's but there system is shocking, slow and prone to crashing. The CAP valuation anywhere is much better.

 

But in all honesty I sure we all use the same system, look at CAP, Glass's and Deltapoint and start with the lowest price first!!!

[c_cars 56]

What are everyones opinions of Deltapoint in respect of price comparisons? I still find myself scrolling Autotrader to see what equivalents out there are priced at

[GreenGiant 287]

Don't know how credible Deltapoint is. Seems a bit random to me.

Surely the current system is:

See how much they're advertised at, deduct your margin and prep costs and see how little you can get it for.

It really doesn't have to be too scientific.

If it's a nice car with good spec, history and condition, it'll sell on its own.

If it's an ordinary car just like everybody else has got, it will also sell.... but only at a price.

The skill is not in the selling, it's in the buying.

[Gavin@Rousdon 137]

Deltapoint isn't bad as a guide to retail price but I'm guessing they get their data from average prices of  whats advertised on Autotrade so the retail price they give can be misleading because it doesn't account for added extras (same as other price guides) and the fact that certain car supermarkets advertise cars that don't exsist at low prices to tempt people in.

[GreenGiant 287]

It's not Deltapoint retail price that's random, we can all work that out for ourselves, it's the Trade prices they come up with I can't fathom. If they get the average selling price from Autotrader etc, where do the average buying prices come from?

If they're using data from BCA and Manheim, then Cap (and Glass, supposedly) do that already, so what's the (delta)point? And how can it be so different in many cases?

And if it's just made up....?