Where you source your vehicles. Perhaps the most important question part 2.

So where should you as a dealer get your used car stock from?

You need to obtain them from the same source that the large used car exporters obtain them from: the Japan car auctions.  You need to buy the best vehicles available in these auctions each day, at the price they are sold for and not at any inflated FOB prices.

The used import car market in New Zealand is perhaps one of the most competitive markets in the world, and to compete in it you need an edge.  That edge is being on the front line of what is available each day at the source of most used cars sold in New Zealand, the Japan car auctions.  It requires understanding and a little skill, but if you choose a good exporter to help you through the process you can succeed.  Also, in choosing your used car exporter from Japan, try and choose one that does not have many customers from your country.  Again, if you are trying to buy online from the Japanese used car auctions from a large exporter, the large exporter faces a conflict of interest.  They may have 10 or 20 dealers all wanting to bid on the same vehicle.  They are also wanting to buy for their own stock.  Put yourself in the position of an agent for a large used car exporter in Japan, they have to get there 20 to 30 “good” cars per day for their own stock to sell to New Zealand dealers.  The stock that they do buy must sell for them in New Zealand (or any country they export to).  Where do they get their information about what is a good selling car for New Zealand?  Suddenly they have their dealers all bidding on a yellow Mazda Atenza sport.  Now what is a good car for our large exporters stock?  The car everyone wants to bid on in the auctions that day.  Who wins the competition?  The large exporters stock wins the competition.

So as a used car importer, you need to compete against these large dealers to survive.  You need to own the best available vehicles each day in the auctions.  It is a competitive world and the man with the best stock wins.

I have written this specifically thinking of the New Zealand market, but to an extent it applies to all used Japanese car importing markets that operate in a competitive market.
Get to the front line.  Choose the best stock, survive and succeed.

Sourcing your stock. Where from? Perhaps the most important question. Part 1

I once spoke to a used car dealer in New Zealand.  I asked where he was sourcing his stock (used cars) from.  With his fears that I was a salesman trying to change his status quo, he quickly replied that he sourced his cars from one of the very large importers into New Zealand, at their stock yard in Auckland, New Zealand.   And, that he was very happy with the relationship, thank you very much!

My next question was “How sales were going?”

His reply was “Sales were terrible.”

Something to do with the weather, or the downturn in New Zealand, or something (the moon perhaps, tides?)..

He didn’t go the extra bit to connect the two questions together.  Just perhaps he was sourcing his stock (used Japanese cars imported from Japan) from the wrong source.

Without naming companies let’s have a look at the source of this used car dealers stock.  This large export company purchases these vehicles in Japan and then immediately makes them available on their homepage, at whatever price they like.  If this car exporting company thinks their purchase was a bargain then they will sell it at a much larger margin in their own stock than they actually purchased it for.

They are a large company and they need to do this to survive.  Simple commissions are not enough for them in this economy and they need to make that plus alpha as much as possible.  Their goal is their profit and not the end users profit (in this case the New Zealand car dealer).

Let’s imagine this exporting company buys 50 cars a day for the New Zealand used car market (or any market).  Of those 50 cars, there may be 10 cars that will sell very quickly, highly suited for the New Zealand market.  Through much research they know their cars.  They are like Google, they have they client orders, they can see and use their clients information and capitalize on it.  They sell these vehicles at higher margins to what they could be bought directly from the auctions, so the profit margin of the New Zealand used car dealer diminishes.

Now we have 40 cars left.  From these 40 cars, the better of these are bought in Japan by other New Zealand dealers.  What is left for the exporting company’s stock yard in New Zealand?  Boring, standard, plain, common vehicles that could sit in a dealers yard for a month or may be a year!  Well why buy these used cars, they don’t seem to be good stock right?

Good question!  The large car exporting company knows this weak side of their equation, so what do they do?  They need some sort of incentive for their dealer network to buy these stock standard boring cars, that the public basically don’t want to buy.  The incentive is credit.

Because many dealers have gone belly up in New Zealand (and other markets), the New Zealand banks will not lend to them.  They may have $500,000 worth of stock on their yards, but the New Zealand banks will not lend them a cent.  The large car exporting company capitalizes on this and gives the New Zealand dealer a line of credit on the car they are selling …. can you see where the story goes?   Can you see the stranglehold these large exporters exert on the weakened New Zealand car dealers?  I also know that the large used car exporters from Japan also have their strong links to the New Zealand debt collecting companies.  It is a no-win scenario for the New Zealand car dealers that you definitely don’t want to try to compete in.

So how can you win as a small car dealer in New Zealand or any other country facing a similar situation?  Join us in the next blog for some great ideas.