SANDY, UT – Selling used cars is “the funnest part of the auto business” – and one of the most profitable, says Greg Miller, CEO of Larry H. Miller Cos., an enterprise that includes 41 dealerships in western states.
Despite the joy a used-car operation can bring, you’ve got to work at it, he says. “It takes skill, knowledge and effort to profitably run a used-car operation. You can win and lose there faster than any other part of a dealership. You need to be good to survive.”
Miller, son of the late legendary megadealer Larry Miller, got a valuable, tough education when in 1994 his father put him in charge of four start-up businesses, including two used-car centers.
“That was an eye opener,” he tells Ward’s. “I learned a lot. I didn’t realize it at the time.” One reason for the delayed realization was that he was so preoccupied with operational difficulties.
A big lesson learned was the need to acquire inventory that would turn quickly, not just fill up the lot.
“We had a wholesale used-car buyer who was only buying a few vehicles a day,” Miller recalls. “My dad said to him, ‘How can I fill a 7-acre (2.8 ha) lot at that buying rate.”
So the buyer went to the other extreme and indiscriminately bought and bought.
“It was like he was in the auction lanes with a broom propping up his arm during the bidding,” Miller says. “We ended up with a lot of bad inventory. In one quarter, $350,000 was lost on an operation that had my name on it.”
Miller turned that around by adhering to some basic principles of used-car sales. Among them: stock wisely, pick vehicles with high-gross potential, keep a 30-day supply and wholesale units in retail stock past 60 days.
A vibrant used-car operation with “a head of steam” helps other facets of a dealership, including finance and insurance, service and parts and even the new-car department, he says.
The Miller organization last year retailed 26,857 used vehicles with revenues totaling $431,531,000.
“Dad used to say, ‘Each used car is its own market, because no two are alike.”
If a customer on a dealership used-car lot falls in love with a particular vehicle, of a certain age and specific odometer reading, that shopper will be hard-pressed to find that vehicle anywhere else.