5 Factors That Affect Profitability for Motor Dealerships

12 Jul 2022 Helpful Tips


As a Motor Dealer, your number one priority is to reduce costs and maximise profit. When it comes to running a Motor dealership, there are many factors that will determine whether your dealership is profitable or not.

Here are 5 Factors that Affect Profitability for Motor Dealerships in 2022.

1. Vehicle Acquisition Costs

The number one factor that often determines whether your dealership is profitable or not is the cost you acquire your vehicles for. One of the biggest mistakes Australian Motor Dealers make is getting into bidding wars to acquire vehicles. When this happens, dealers often find themselves paying overs for vehicles which ultimately limits profit margins when you go to sell it later.

To generate a strong profit, your dealership needs to source vehicles at the right price! It is so important that your dealership understands industry standard vehicle pricing, resale prices and most importantly customer demand. The more knowledgeable your dealership is, the less likely you are to make a poor purchasing decision. If a vehicle doesn’t make sense from a financial standpoint, just walk away, there will always be another!

Related Article: How Australian Motor Dealers Can Get More Vehicle Stock in 2022.

2. Vehicle Advertising Costs

It’s no secret that vehicle advertising costs are skyrocketing! The more your dealership spends on advertising, the less profit you will make on the vehicle when it sells. Let’s face it, vehicle advertising is essential, but that doesn’t mean you need to sit back and accept large prices.

To reduce your vehicle advertising spend, it is important your dealership has or implements a strong reporting system. The benefit of having a strong vehicle reporting system is you can easily identify what advertisers are providing a return on investment and what advertisers are not. For those advertisers who aren’t providing a return on your spend, you can instantly stop sending your vehicle listings to them!

The Australian Vehicle Advertising landscape is as competitive as it has ever been! Listers are fighting for your vehicles and are handing out great deals. You don’t have to rely on paying massive prices with large advertisers in order to gain attention. Do you research, try different advertisers and see what provide the best return, if you find an advertiser isn’t providing you with anything, stop sending your vehicles to them, it will save you thousands in the long run.

Related Article: Expenses Car Dealers Can Reduce Easily in 2022.

3. Vehicle Pricing

Often, the biggest deciding factor for car buyers is the price. To generate a strong profit, your dealership needs to have the appropriate pricing strategy for your vehicles.

A mistake that many dealers make is having vehicle pricing strategies that is either too high or too low, either option turns customers away from purchasing with your dealership. Before you put your vehicles up for sale it is important that you understand the current industry standard pricing for the vehicle you are about to sell. See what competitors are offering and try to do everything in your power to give customers something better. The better your dealership’s pricing strategy is, the more profit you will generate.

Related Article: 5 Costly Mistakes Australian Car Dealers Make in 2022.

4. Staff

Believe it or not, your staff play a huge part in determining whether your dealership is profitable or not. If your dealership wants to be profitable, it is important that you train and employ the right staff for your dealership.

Your dealership staff should understand their roles and responsibilities and meet key performance objectives. The last thing your dealership wants is to build up staff costs without getting an adequate return on investment. The better your staff are, the more sales they will generate, and the more profitable your dealership will be.

Related Article: How Car Dealerships Can Minimise the Impacts of a Staff Shortage.

5. Customer Service

Customer Service is the most important part of the car buying process. If your dealership doesn’t provide a warm, welcoming and simple buying process, customers will go to other dealerships who will.

To maximise profitability your dealership needs to provide a customer service experience that is second to none. Look out for your customer, answer their questions and most importantly make your sales process as easy as it can possibly be. The easier the buying process is for customers, the more likely they will be to convert.

Related Article: Top Strategies to improve Customer Service at your Dealership.

Final Word,

There is much more that goes into generating a profit then what is thought. To be successful in the Australian Automotive industry, your dealership needs to stay on top of both internal and external factors and adapt to industry changes. The 5 factors mentioned above will affect profitability for Motor Dealerships in 2022.

We hope you enjoyed reading this article. To read more articles like this, please visit the EasyCars latest news page here.

About EasyCars,

EasyCars by Jeal is an Australian, web-based, dealer management system that automates the buying and selling of motor vehicles. Using the latest technologies, EasyCars removes frustrations experienced at the dealership and opens your doors for greater growth.

EasyCars features include Simple Stock Management, Automated Advertising, Integrated Accounting, Government Compliance, Business Reporting, Reviews Management, Dealership Websites and more.

To learn more about EasyCars Dealer Management System and to arrange a no-obligation free demo, contact us today on 1300 473 744 or submit the form below.

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