Toronto - earlier this summer, Toronto dealer Nasser Rod had 25 SUVs on his lot at AutoRama that certainly weren't going to move fast after gas prices surged from $1/liter to $1.40/liter.
But with the flexibility that many small, independent dealers like Rod enjoy, he was able to cut the prices overnight and liquidate the sluggish inventory.
To accompolish this, Rod placed $1,000 to $2,000 cash-back incentives on the SUVs, which were quickly snatched up by customers. He doesn't have a single SUV left at his store.
"We changed the price overnight and all of them are gone" Rod explained.
"The advantage is we move faster." he said of operating a smaller dealership, "A decision is made within 24 hours, We can maneuver and we change prices faster. If we decide to bring prices down, we don't have to have someone tell us."
In economic times like these, having that flexibility to adapt can be crucial for used dealers, who may have to cut prices or bring in lower priced units to meet the budgetary needs of their customer base.
"I think, right now, the challenges are the economic circumstances you hear on the news every day and the other things is gas prices," he explained. "Suddenly, when the market starts fluctuating and, at the same time, the gas prices are $5/gallon, it affects our operations. It's going to affect our business."
So, being able to change a store's business strategy quickly is important, even if it means taking a hit on profit margins to meet what consumers can afford.
"When times are tough, I bring in a little bit cheaper cars," Rod explained. " You're trying to adjust to the world outside. You have to be flexible. You have to adjust prices of cars to people's ability to buy."
A fairly young dealership, AUTORAMA opened its doors in 2001 and currently has 10 employees. There are five sales personnel and five employees for office-related tasks.
The 35,000 square-foot facility is completely indoors and typically stocks between 130-150 units, almost 80 percent of which Rod, acquires from auction. He said he purchases his entire inventory from Canadian sources and sells roughly 700 vehicles a year.
Rod, who came to Canada in 1990 after having grown up in Iran, said he saw the need for improvement in the country's used vehicle industry and decided to enter the business.
"I found that used-car lots weren't meeting customer's needs," Rod commented. "I saw that there was room for improvement, so I got involved."
One area, in particular, that Rod pays careful attention to is honesty with customers and vehicle quality, as reputation can be paramount in the used-car industry.
"Whatever we know about the car, we transfer to the customer before they sign the deal." Rod noted. "By doing that we are selling them a good product, so they will have less headaches in the future."
He utilizes a vast array of carproof history reports and makes sure every vehicle he puts on the showroom floor has been examined extensively. According to Rod, any vehicle he sells to a customer has been inspected three times.
Obviously, the mechanical and cosmetic conditions are checked at auction before he buys a vehicle. Then he takes the vehicle to another mechanic whom Rod outsources for his service operations.
The vehicle is inspected again after the purchase before he puts the unit on the floor. If a shopper buys the vehicle, another thorough inspection is performed before it is delivered to the consumer.
According to Rod, his store has an 80 to 90 percent satisfaction rating, meaning this percentage of customers never report problems with any of the units they purchase from him. However, if something does go wrong, Rod offers several options.
For customers looking to purchase an extended warranty, Rod offers a warranty that has plans anywhere from three months to three years.
"Word of mouth is very important in this business," he added, noting that his return-customer rate is between 10 to 20 percent. "We want to bring that number higher because the cost of bringing back customers in less than bringing in new customers."
Another key point that Rod stresses is understanding customer base. Toronto has more than 2.5 million residents; many of them are from other parts of the world. In fact, one report indicated that roughly half of the city's populace is born in a foreign country.
With such an international flavor, Rod has found that shoppers in the area prefer import brands, especially Japanese cars. This leads to only 25 percent of his inventory being North American units, with the rest being from Japan.
"I think the makeup of the city (plays a role) and people assume that Toyota and Honda break down less, or that they have greater resale values than North American cars," Rod explained. "and they're right most of the time."
Rod also emphasized the importance of the Web in his operations. He advertises his inventory on AutorTrader.ca, Wheels.ca, Carpages.ca and Autocatach.ca. AUTORAMA is also connected to several banks through the Internet so it can offer on-the-spot financing for consumers.
Moreover, he maintains s strong relationships with the Used Cars Dealers Association of Ontario, where he's been a member since 2001. Road said that he strongly believes that UCDA has very highly qualified staff and the organization's support and services benefit both customers and used car dealers like him.
Ultimately, the success of a used dealership like AUTORAMA comes down to understanding the market and ensuring the best quality to the consumer.
"We research the market for the correct price. What matters is what the best price for that vehicle is today?" Rod stated. "We make sure the background of the car is perfect. We make sure the reconditioning and appraisal is better than others and we make sure the price is better than others."
(Source : Auto Remarketing, Nov 2008)
