Spanish Study Suggests Used Vehicles’ Profit Promise

MADRID – Used vehicles have become a crucial business for Spain’s franchised auto dealers, generating 15% of total income and 8% of profits during the past year.

Second-hand vehicles were responsible for €8.8 billion ($12.2 billion) in dealer income in 2013, up 4.8% over the previous year.

These are some of the findings in a survey conducted by Snap-on Business Solutions for GANVAM, one of the leading associations of Spanish auto dealers, vendors and repairers.

Juan A. Sanchez, president of GANVAM, believes retailers specializing in vehicles 3 to 8 years old could increase sales by 300,000 units if they had loyalty programs like those offered with new vehicles.

Dealers currently sell an average 0.5 used vehicles per each new one, while the country’s total sales ratio is 2.3 used vehicles per each new one.

Sanchez says that is why automakers operating in Spain are making a great effort to convince their official distribution networks of used vehicles’ importance to their income.

The country’s used-car market is dominated by transactions between individuals, which comprised 61.4% of total volume in 2013, up 2.6% from 2012. Auto retailers only accounted for 23%, followed by free-traders (10%) and car-rental businesses (6%).

That should make individuals the target for dealer networks to capture those additional 300,000 used-car transactions and potentially raise their share of that market from 33% to 51%, Sanchez estimates.

The Snap-on Solutions survey finds new and used vehicles accounted for an average 41% of auto dealers’ gross profit in 2013, matching the prior-year level. However, in terms of revenue, sales rose two percentage points to 75% last year due to financial-aid and subsidy programs launched by the Spanish government.

Sanchez says automakers have pressured dealers during the ongoing economic crisis to more actively market used vehicles in efforts to get the maximum return from all business areas of those dealers.

However, much remains to be done to persuade dealer networks that used vehicles are not a residual but instead a substantial source of business.

“Of course, all the elements of quality, history, and origin of the vehicles should be provided to ensure the customers a safe and confident purchase,” Sanchez adds.