Dealerships That Buy Used Cars

Q.Do you work for a used car dealer or a new car dealer? What kind of new car dealer buys used cars???? I never heard of that. New car dealers don't make any money till they get rid of the trades. Why would a new car dealer want to buy USED cars? The last thing they want is a trade. The best deal for the dealership is NO trade. Salesman Managers and salesman are paid a bonus on no trade deals. Fourteen to one no trades? I think you I just got in town from the farm or something?

A.Any new car dealer who wants to make money buys used cars, usually from auctions. One of the peculiarities of being a Toyota dealer is that other than turned in lease cars which are often not maintained properly, 3/4 of the Toyotas traded in are over 5 years old and probably half are over 7 years old. As you know, "cherry" used cars for a dealer are 2 to 5 years old so the older stuff gets wholesaled out. Since the average gross per used vehicle retailed is $500 to $100 higher than the average gross per new car retailed, most dealers like to sell used cars. Toyota's business management department uses a 2:1 new to used car sales ratio as a rule of thumb for good business practices for a dealer. One of the other things peculiar to Toyota is that customer loyalty to the Toyota brand is the highest in the industry, with something like 70% of new vehicle buyers saying that they would buy another Toyota. Perversely, Toyota dealer loyalty is near the bottom of manufacturer rankings, with less than 50% of buyers saying that they would buy their next Toyota from the same dealer. As a district manager, besides wholesaling cars to dealers, my job was to see that dealers had sound business practices and improve their sales practices and salesperson training and professionalism. Toyota would rather see their dealers making additional profit from used vehicle sales, routine service sales, and parts sales than from the F&I depts, which tend to sell substandard quality accessories or rust and just packs.

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