Reasons Why Car Dealerships Fail – How Your Dealership Can Avoid Them

23 Nov 2021 Helpful Tips


1 in 5 Used Car Dealerships will fail within their first 2 years of trade. Running a used car dealership is not an easy task. From sourcing stock to advertising and everything in-between there are so many things to do on a daily basis. With so many things to do, many dealers can get side-tracked working in the dealership instead of on the dealership.

This brings us to the question, why do so many used car dealerships fail? In short, there is no easy answer.

Here are the 6 main reasons why Australian used car dealerships Fail and how your dealership can avoid them:

Let’s get into it.

Poor Business Plan

There’s a lot more to being a motor dealer then sourcing stock and putting them up for sale. To be successful in the Australian motor industry, used car dealerships need to have a sufficient business plan that they can use as a foundation to base future business decisions on.

Why are you becoming a used car dealer? What are you striving to achieve? How many cars do you want to sell a month? How will you source stock? How will you gain customers? These are all essential questions that need to be answered in your business plan.

Before starting any car dealership, it is so important you know what you want to achieve and how you will go about achieving it. Find your target market, research the market, and put a plan together that you can use as the foundation.

Related article: What Australian Car Buyers look for in a dealership.

Not setting goals or KPIs

This is a big one! Setting and Tracking Goals or KPIs are essential for success in any industry. If your dealership doesn’t track performance, you could be losing thousands!

How will you know if you’re selling enough cars? How would you know if your dealership is growing? How will you know if your sales staff are doing their job? The answer is you wouldn’t. If you go months of not knowing essential business information you will quickly find yourself in a bit of pickle.

One of the key qualities of successful Australian motor dealers is setting and tracking different goals, objectives and KPIs. Set different goals and KPIs, let your staff know what’s expected of them and report on them frequently.

The benefit of tracking goals and KPIs is you will instantly know if you are performing or if you are not. You will have more of an opportunity to implement changes to key areas that need improvement before they impact profitability and sales.

Related Article: How Motor Dealerships can improve reporting.

Too high overheads & Overspending

No matter what industry you’re in, if you can’t keep your overheads down - you will quickly go out of business! If you find your dealership is having trouble sourcing stock, paying staff, advertising, or paying rent – your dealership could be in trouble.

To minimise the risk of insolvency your dealership needs to assess all business costs and plan for different scenarios. Many Australian dealers often rush out and source as much stock as they can without assessing the risks that come along with it.

One of the biggest mistakes Australian car dealers make is overspending on advertising. Many dealers often put their cars on as many listers as possible without effectively tracking the return on investment.

To minimise your overheads and avoid overspending dealers MUST frequently report on their advertising spend. See what advertisers are producing the best leads and which ones are not. Instantly make changes to advertisers who are not providing bang for your buck!

Related article: How to get the best return out of your online advertising.

Not adjusting to market conditions

The Australian Automotive market industry is continuing to change. The way dealers sold cars 3 years ago is much different to the way they are sold today. To be successful, dealers must adapt to market conditions.

In 2020, 95% of Australian car buyers use the internet as their source of information instead of attending a dealership – highlighting the sudden buying shift. Understand your customer, find out how they are finding a car dealership and have the tools in place that caters for them.

Related article: 5 of the biggest challenges facing Australian Motor Dealers in 2021.

Not understanding the competition

The Australian Car Sales market is an extremely competitive space. Not only do dealers have to compete with other dealers, but they also have to compete with private sellers.

Australian used car dealers must frequently research the competition. Find out what they are offering customers, their pricing, add-ons and find a way to either match or better their offer. At the end of the day, Australian customers will go to the seller who offers them the best price.

Not using a dealer management system

We get it, as a motor dealer you often have a thousand different things to do. Dealers just don’t have the time to get through them all manually.

Dealers need to use a dealer management system to streamline and automate the common day-to-day tasks like stock management, advertising, and compliance. The biggest benefit of a dealer management system is it frees you up to focus on growing leads and sales for your dealership.

Related article: What tasks can you automate using a Dealer Management System?

Final Word,

We aren’t going to sugar-coat it, running a used dealership is not an easy job. Many dealerships will enter but only some will succeed. Addressing the 6 main points mentioned above will help leverage growth for your dealership in the future.

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About EasyCars

EasyCars by Jeal is a web-based dealer management system that simplifies and the buying and selling of motor vehicles in Australia. Using the latest technologies, EasyCars removes the common frustrations faced by dealers – opening the doors for future growth and higher profitability.

EasyCars includes all your everyday needs including Stock Management, Automated Advertising, Government Compliance, Business Reporting, Integrated Accounting, Facebook Automotive Inventory Ads, Reviews management and so much more– everything you need to run a successful motor dealership.

Call us today on 1300 473 744 to see what sets us apart or submit the form below for a free no-obligation demo of EasyCars.

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