Dealers could lose nearly £500m in 2024 through mispricing their stock, says INDICATA UK.
Missed revenue opportunities are mostly attributed to dealers pricing their best cars too low and selling too quickly and holding onto low quality stock too long without lowering the price.
Dean Merritt, INDICATA UK’s head of sales, said: “The level of used profit being left on the table by dealers is worrying, especially when there is a restricted supply of used vehicles in the market.
“With used cars making such an important contribution to overall profitability dealers must commit to a dynamic pricing strategy supported by real time data.”
INDICATA analysed more than 50,000 used cars on sale or that had been sold by 300 UK dealer groups during a 12-month period based on sale price, speed of sale and Market Days’ Supply.
The biggest loss of over £400m was caused by dealers selling their most popular used cars too quickly, in less than 30 days, and at 100% market price rather than charging a premium.
A further £15m was lost by hanging onto older cars beyond 60 days whilst continuing to charge 100% of the market price rather than lowering prices to improve speed of sale.
INDICATA recommends a dynamic pricing approach on stock to optimise profits and stock turn supported by real time used car pricing data.
Dealers need to invest in the right stock that is in high retail demand and keep the best part exchanges for their forecourts and trade the rest.
Pricing the best stock above market price will optimise profitability and avoid it being sold too quickly. If the car has not sold within the first month it should be re-aligned with market prices.
With average stock, INDICATA recommends taking less of a profit premium at first and re-pricing it regularly and selling it before incurring a loss.
On slow moving stock, dealers are advised to trade the majority of cars rather than retailing them.