• Mario Villarreal Gutierrez CEO @Plusmotors & Cofounder @Intelimotor

Being a pre-owned car dealer for over 25 years has taught me a few things about the business.

I have lived through it all, and believe it or not, I am thankful for the mistakes and problems I have had to face along the way, they have taught me much more than any success.

Today I share with you what in my opinion are the biggest mistakes that pre-owned car dealers regularly make, which greatly limit the profitability and growth of their business.

1. Buying based on "gut instinct" and incomplete information.

The first major mistake, and in fact the one with the greatest impact on business profitability, is making investment decisions based on a methodology that is based on "gut instinct" and incomplete, outdated information.

The "instinct" is what the valuator says he or she has. On this, the only thing I have to mention is that, while there is definitely an element of experience, this in no way replaces the importance of other considerations that are much more relevant to the decision making.

"The pre-owned business is in the buying business. “

Mario Villarreal Gutierrez.

One thing that is absolutely certain is that in this business, the money is made on the purchase.

If it is purchased well, the car purchased will generate the desired profit, if it is not purchased well, it will not, or worse, it will result in a loss, it is as simple as that.

That is why, in order to avoid problems of flow and profitability in the business, one of the priorities of every dealer must be the continuous improvement of its purchasing methodology.

What I have personally learned is that there is no better methodology than one where the customer is the centre, and most importantly, putting yourself in their shoes to understand their way of thinking.

Today, we know that the shopper has more shopping options available to him than ever before. No longer do they have to go from place to place looking for the ideal car, now, from the comfort of their home, or indeed anywhere, anyone can see hundreds of thousands of options in an instant.

Through Facebook, Mercado Libre, Seminuevos.com, Autocosomos.com.mx, Segundamano.mx, among other great platforms where car sellers and buyers interact, the buyer can quickly know and analyse all the options, in order to find the best cost/benefit alternatives. The buyer will not be interested in, let alone go for a test drive of a car that has a very high or significantly low entry price compared to other options from different businesses that offer exactly the same. It is for this reason, and this reason alone, that not analysing the entire market, as the customer does, is a big mistake in making an investment decision.

For me it is very simple, a pre-owned car should be purchased by first understanding how much it is going to sell for, something that can only be done by reflecting and asking questions such as: against whom am I going to compete and against whom will customers compare me?

Understanding the selling price before even making an offer is not magic, even if I wanted to, I cannot see into the future. What I can do is use data science with my valuation application to see how much cars like the one I am considering buying are selling for, how many competitors there are (in real time), among other relevant data and indicators, so I know what price to buy it at to ensure it sells fast and generates the profit I am looking for.

2. Set the selling price based on the purchase price.

The next mistake I want to mention is just as detrimental as the first, and that is that the selling price should never be defined by the buying price.

The customer has no idea, let alone cares how much the dealer's cost was, he is only interested in finding the car with the best cost/benefit ratio.

As I mentioned earlier, with the digital facilities that consumers now have, it is really difficult for a dealer to sell a car that is poorly positioned relative to the other options on the market.

That's why an asking price based on purchase value is never going to work. The selling price should be set based on the actual market conditions, especially the supply, in other words the competition, in order to have a car of high interest that will result in fast lead generation, sales and positioning for the business.

3. Limit the exposure of the inventory.

Another common mistake, also with serious repercussions, is the self-limitation dealers impose on themselves in terms of displaying their cars.

As we have seen, today the majority of a dealer's sales originate from digital media. Players such as Mercado Libre and Facebook do an excellent job of generating traffic to their site, allowing any dealer to expose their products to millions of visitors.

But then why do we see that not all dealers advertise in all possible media? And why do those that do advertise, often upload their products with incomplete information or even errors?

It is something very basic, but the reality is that I keep seeing dealers with these kinds of limitations and problems, that at the end of the day what they are causing is that their inventory sells slower, resulting in higher costs and less profit, all this because of bad exposure.

The good news is that this is very easy to fix, I recommend:

(1) Contract a plan with all the relevant marketplaces in your area (e.g. Mercado Libre, Seminuevos.com, Autocomos.com.mx, Segundamano.mx etc.).
(2) Integrate digital shops to your Intelimotor account (or manage manually).
(3) Publish and manage your inventory everywhere from one place.
(4) Ensure that when publishing cars all attributes are denoted without errors.

4. Lack of agility and quality in lead management.

Finally, and I don't want to leave without saying this even if it is very brief, but none of the above matters if there is no agility and effectiveness in lead management.

In order to make sales, it is essential that the dealer is quick to respond to each of the enquiries of those interested in their cars, but of course, without sacrificing quality.

Friendliness and respect, coupled with excellent customer service, one of genuine helpfulness, is the finishing touch in this business.

In order to operationally deliver this, the key is to have a great service team, and in parallel look every day to make more automations that drive a better user experience for your customers and higher sales for you.

Concluding remarks...

Sometimes as a dealer, the hardest part is identifying the errors in the operation, and sometimes the hardest part is fixing them.

Today, we have managed to identify those mistakes, and today we are going to solve them as well.

At the end of the day, the pre-owned dealer needs tools and solutions to the problems that weigh most heavily on him. In order to truly empower the business, the best dealer will have to do much more, and it all starts with their infrastructure and technological resources. The good news is that at Intelimotor, we give them all of that, so in reality, getting where they want to go is much easier than they might imagine.

That's all for today, we hope you find this information valuable.

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