Industry Analysis
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Industry background and overview
Since the beginning of the car there has been history of used car sales and since World War II boom in auto sales there has been an increasingly large amount of used autos being sold. Immediately following World War II, there were roughly nine buyers for every new car produced. Sales personnel merely had to find out who could afford a new car. “Afford” was defined as paying cash. This condition existed until the early 1950s when supply began to discover that some new terms were creeping into the retail salespersons vocabulary. Words like “overallowance,” “discount,” “deal,” and “terms.”
The emphasis, however, was still not on product but on price. In addition, the asking price was no longer final. There was also, if you could haggle a little, a taking price. It was possible to bargain with the dealer for the first time.
During the 1960s, other new merchandising techniques were introduced. “Sticker price,” “fleet price,” “hard sell,” “50 over invoice,” “high-powered advertising,” and “free” accessories were but a few new innovations. The buyer was becoming better educated, better able to buy–thanks to 24- and 36-month payments–but still confused and fearful of price. “Good deals” became “bad deals” after talking to friends and neighbors. Caution became the watchword when buying a car.
The advent of the 1970s brought more confusion to buyers with new procedures like leasing, 48-month payments, credit unions, rebates, and consumer advocates. However, in defense of the consumer, books on “How to Buy a Car,” “Invoice Prices U.S. Cars,” and “Used Car Buyers Guide,” were published and sold by the millions.
During the 1970s automobile salespeople became conditioned to the notion that customers were interested in only one thing–the very lowest price. The automobile showroom atmosphere didnt change very much from the 1970s to the 1980s. Most retail salespeople saw the business of selling automobile as an “us against them” hard-sell game. Those who sold popular Japanese products became arrogant and insensitive to their customers and those of us who sold American vehicles continued with the approach that price, and price alone, sells vehicles.
As the 1980s came to a close, however, the winds of change began to impact the retail automobile marketplace. Today, in the 2008, the business of retailing automobiles is quite different than it has ever been in the past.
In todays marketplace, 5 out of every 6 cars sold in the United States are used. As Tom Webb, Manheim chief economist says “the bigger profit opportunities will remain in used vehicles.” Due to couple of factors there has been an increased in used car sales. “One was the economic slowdown of the late 1980s and early 1990s.” Another factor that increase the sales of auto car sales was and still is, is the high prices of new automobile. This are factors that are contributing to the used auto industry making stronger because consumers are buying and financing more from the used auto dealerships to save themselves the hassle of having to make big payments on new cars and being able to afford important things needed in this economic slowdown.
Since the year 2005 the average new auto dealership franchise has reported losses in profits, meanwhile the used auto dealerships have been reporting a increase of twenty percent increase in profits. “along with a labor market that will be unable to keep up the past pace