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VEHICLE MIX - WHAT PRICE POINTS MAKE THE MOST SENSE
We just closed our first pool and are putting all of our focus on CAC at this point, averaging 15 deals per month. We're small (25 vehicles currently). Have been working on ACV cars $2500 - $5000 and ACV trucks/suvs $3500 - $7000. That means most of our cars are selling at $5000 - $9000 and trucks/suvs at $7000 - $11000. As we all know, they are hard to buy in that range if you want something clean that doesn't need a lot of work. I'm hesitant putting vehicles on the lot that are going to sell for $12k, $13k for a couple of reasons:
1) Most of my customers think they want these but they are generally tier 3, tier 4 customers and we need to get $5000 down to get them into one. They of course don't have it. Then we have to re-direct them into something more reasonable, just like a split floor dealership would have to.
2) Costs - if we invest $8000 on 2 cars at $4000 each we can maybe make $1500 each up front with CAC or $3000 total. If we invest in 1 $8000 car, we maybe make $2000 up front on that car and it tends to take longer to sell. What makes the most sense.
3) With interest rates at 20% or more, customer payments move up dramatically on these higher priced cars. Are we setting more customers up to fail?
My question is, are any CAC dealers out there that have moved up in prices to that $12,000 - $15,000 sell price and what have they found out and how did it work for them?
Replies to This Discussion
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Permalink Reply by Karl Jensvold on -
Dave
Be sure to use the inventory guide in our dealer portal to help determine the inventory mix for your store. That is the best tool for your dealership.
If possible we stay in that $2500-7500 Acv naturally trucks/suvs being in the higher range.When you get to vehicles retailing over the $12000 mark the payments get quite a bit higher and down payments out of range for most customers unless its during tax return time. I do know of some dealers at the higher prices and get larger portfolio express checks but I believe you are losing volume unless you have a good mix.
Karl Jensvold
Winners Circle Auto Center
Lincoln. NE
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Permalink Reply by Dave Fortney on
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Thanks for the info Karl. I do use the inventory guide but it always says I'm lacking in the 8000 - 10,000 and the 10,000+ ACV price ranges. But you confirmed what I thought, that those higher prices vehicles are harder to make work.
Dave Fortney
Dipper Dave's Used Cars
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Permalink Reply by Michael Clinton on -
I primarily carry vehicles in the 3-7k acv range, but I have sold several vehicles well above that and made good profits on them with CAC. I sold an 05 Mercedes C230 for around $16k and an 08 BMW 328i for around the same thing, I also sold an 07 Jeep Commander, 06 Jeep Grand Cherokee, numerous 05-06 Ford, Chevy, and Dodge Crew cabs in probably the $12-$15k range. The customers were either tier 1 or 2 customers on the 1st 2 with 100k or so in income, but I made probably 2k or better on upfront advance on both of them. The customers on the rest are probably 2-4 rated customers, but they tend to have great incomes, and I probably make around a $2k or better advance on most of them. I would say most of my customers on these deals have incomes in the 60k plus range. My average CAC contract is around $16k. I'm relatively new to CAC, about 4-5 full months in and I'm doing less than 10 CAC deals a month, but I'm trying to do very high quality CAC deals, and structure deals that will outperform their expectations, and build a strong pool. I'm hoping to close my 1st pool in about 6-9 months, but I'm very careful on my CAC deals. I could probably move more CAC deals, but if a deal doesn't feel right, I just work it another direction. I'm also a BHPH/LTO dealer, and setup with CAC to be able to move a higher quality vehicle. Before CAC my average inventory was probably 1,500-3k acv, so I'm able to attract better customers with better inventory. I would say stick with what works, but try to carry a few higher end units and see how they work. As long as you steal them, any of them will work, but you're not going to be able to make them work for someone that's making $2k a month. My experience is that of course, many people may want the $14-$16k vehicle, but they have reasonable expectations. Sure some even really expect you to deliver it to them, and don't understand why they need $5k down to make it work, but it will surprise you the # of people that will show up, want it, can afford it, and actually leave with it. I've taken a couple of $4k down payments on deals, but I can't remember how many $3k down payments I've taken on these deals, and I'm not talking about tax refund customers either. I'm talking about customers that really make $60-$120k a year, but have had credit issues, and some that don't have issues, they just don't want to deal with a bank, or some slick new car car store, and I see these types every week. Hope that I've been a little helpful. Good luck with CAC, I certainly love the program, and I can't wait until I finally get my 1st pool closed.
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Thanks Michael. This reinforces the direction we are going. We've also had success with the right vehicles at a higher price point, mostly Ext Cab GM trucks 03 - 04 that are really nice.
How have you attracted customers to the BMW & Mercedes? Obviously you need to find someone with enough income that is vehicle specific to get them in the door. What advertising have you used that works to find those customers?
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