USED car sales are back in focus in Australian dealerships as new-car sales stabilise and new brand entries aggravate a crowded and fragmented market; all pointing to the potential of reduced dealer returns.

In this environment, the recent AADA Convention was told that dealers holding a legacy franchise should elevate the focus on used cars to cover any shortfall.

On a Sovereign Insurance General Session panel titled 10 Reasons Dealers Should Build Their Used Car Businesses, BDO Australia partner and national leader of its automotive section, Sam Venn, said that in 2024, Australians bought and sold 2.32 million used cars.

L-R: CJ Jayasinghe, Sid Cetindag, Jo Stephens, Grant Cameron and Sam Venn

“But dealers captured only 39 per cent of those transactions,” he said.

“That means the biggest vehicle marketplace in Australia is still largely happening outside the dealer network.

“Private sales and digital marketplaces compete hard on price, and customers can compare everything instantly. 

“But private sales and digital marketplace are nothing new. Deals have always competed with the driveway sale, the classified ad, and the online listing. 

“But what about the emergence of the large independent used car retailers? 

“They compete for inventory in the same market, and they face similar market perception challenges. So, what advantage have they built? Is it focus? Is it speed? Is it data procurement, stock discipline, or a culture built entirely around used cars. 

“Potentially, it’s all the above because the prize is real. Used cars are a pathway to more growth, better customer retention, and long-term resilience,” he said.

Sam Venn

Mr Venn said that research shows used retail represents only 12 per cent of dealership sales, and some dealers struggle to sell one used car for every three new cars sold. 

“Used cars are not the supporting act; they are the profit battleground,” he said.

“But opportunity does not become profit by accident. Strong used car operations take discipline. Inventory ages, values move, reconditioning delays destroy margin, and every day in stock is a decision.

“So the question is not: Should dealers build their used car business? The question is sharper. Who will source better? Who will price faster? Who will turn stock harder? Who will capture the customer before someone else does? 

“And, in a market moving this fast, the real question is who will lead?”

Sid Cetindag

Sid Cetindag, dealer principal of Binks Ford and managing director of SNC Automotive Consulting, said used car retention was probably one of the trickiest areas for a new car franchise because purchasing is mainly done online and in many cases, from another state.

But the key to strengthening used car sales, he said, was to have a strong customer loyalty and retention program.

To dealers, he said: “Go and mine your own database and just make sure that whatever you’re doing at the point of delivering a used car, make sure you book them in, put their first service”.

“It’s no different to what you do on a new car, right? So that’s some disciplines that we’re putting in place – getting the customer back, making sure we’re working with the service manager. These are some little fundamentals.”

Mr Cetindag said the non-negotiables for running a successful used-car business were discipline and strategy.

“They would be the first things. Then you have to have the agility for speed to the market; the quality of the car; and to have the desirable cars. You have to buy right,” he said.

“We also have to trust the data. We’ve got Carsales and AutoGrab. So there’s a lot of data out there and we have to make sure that we pick the right data and make sure that we decipher the data (accurately).

“We have to make sure that we’re just not relying on a tool, but make sure you really understand exactly what you’re looking at. 

“Keep an eye on exactly what the market’s doing. We know there’s a lot of new entrants in the new car market, and every month the new car franchises have levers that are put upon the dealers, so there’s new incentives, and the new entrants and the legacy brands are driving markets up and down, and the used car market also follows that, and it’s a domino effect. 

“So if you’re not watching what’s happening in the market, then you’re going to get caught out. But the biggest thing remains discipline and knowing the market.”

Grant Cameron

BDO Australia partner Grant Cameron said that, looking at his company’s clients, an important key was that the best guys have a strategy. 

“The second thing is the leadership on that strategy,” he said.

“Dealers are distracted with their five departments and all the regulation and compliance that they have to adhere to now, so (success comes from) great leadership and a great team, and measuring the outcomes and inputs on a regular basis. 

“Standalone used car dealers will actually do this almost on a weekly basis. Franchise dealers will do that on a monthly basis.”

The CEO of Perth-based Westside Auto Wholesale, CJ Jayasinge, said dealers have to treat their used car business as importantly as their new car business.

He said that Westside retails more than 13,000 cars a year out of its single site, which means it needs to buy over 1000 cars a month to do this effectively.

“We need to firstly acknowledge that the consumer is more informed than ever before,” he said. “So when they put in a lead or come into your yard, they actually know what similar local vehicles are out there in the market, not just in the state but nationally. “They know the kilometres, the quality, the offering, and they’re making decisions a lot faster if they feel value. 

“And value is not exclusive to price; it has to do with quality and the dealership offering. So, when acquiring vehicles and having to acquire 1000, we actually need to put the same sort of rigour and process in place that you would need in a new-car department when you’re ordering stock from the manufacturer.

“We don’t just blindly chase stock. There has to be a reason for chasing stock, and data is the reason for chasing stock. But to do this well, you need to flip your mindset. 

“Previously, used-car acquisition had been driven with instinct and experience. If your used car department is still driven by that, you’re probably finding it hard to be agile. 

“You’re probably running a business based on predictability, and you can’t run a business based on predictability or a department based on predictability at the moment. 

“So you know, flip the script. We are 80 per cent data, 20 per cent experience.”

CJ Jayasinghe

Mr Jayasinghe said experience was still required because cars have unique selling propositions “like a GVM upgrade or one-off look”.

“So we’ve employed an inventory manager. This inventory manager is a numbers person with no attachment to any segments, no story about how ‘one day they pulled $10 grand out of that car’ so we’re going to chase that car. 

“This manager reports directly to me, so there’s no influence from the used-car manager or buyers. The guide looks at each model, guides the buying team on what to buy based on consumer behaviour, what we should be paying, what we should be pricing that on.

“(We do that) to get a lead from day one – not to sell, but get a lead on from day one. If you don’t get a lead, you can’t sell the car.”

Mr Jayasinghe said that when it comes to EVs, Westside “doesn’t have an EV strategy”.

“We have a customer or data strategy. If the customer, if the data and consumer behaviour is saying move in that direction, we will. 

“If it’s saying that the price is too volatile and the engagement is low, we’ll reduce our exposure. 

“So we’re constantly staying agile. So we stay close to the customer, trust the data, move the car quickly, and we never ever fall in love with a segment.”

Jo Stephens

Carsales’ head of automotive, Jo Stephens, said the market was at a point where there was probably a greater degree of separation between new and used cars. 

“We’re finding that consumers are coming to the marketplace and optimising for value,” she said.

“Value isn’t about price. It’s about the overall total ownership and the benefit of that car. 

“So consumers are coming with a budget in mind. They’re working backwards from there, and they’re looking at all stock types – used, demo and new cars as well – so the line between a used car buyer and a new car buyer it’s not defined anymore. 

“It has definitely blurred into one. But one thing that we do find is our recent study is when the price gap is narrow between a pre-owned and a new car, so $2000 say, the new car becomes much more compelling because then consumers factor in things like finance opportunity and warranty and the quality of the car, and just that general reassurance that new car buyers get when they buy a new car.

“So trust is critical and we’re finding that the quality and reliability from a pre-owned perspective, that is still the leading concern for used car consumers.

“What is key for dealers to really drive home in the used-car space is that buyers want quality and reliability.

“We found that 69 per cent of our consumers, when asked where they prefer to buy a pre-owned – whether it’s from the private market or from dealerships – are wanting to purchase it from a dealer. 

“That’s their preference, and that number actually keeps going up. Private, on the flip side, is around 29 per cent.

“This is where dealers can win this space – it’s about confidence and reassurance.”