Fixed Ops Journal - August 2020 - F14
FIXED OPS JOURNAL
IN WITH THE OLD
Higher-mileage used cars could be solid business as purse strings tighten
ike many Americans, my
wife and I are very worried
about the immediate
future. We are being
extremely conservative financially
until we have a better
understanding of how the
pandemic is going to affect us. We
know we are not immune to pay
cuts, furloughs or worse.
When the lease on our 2017
Chevrolet Volt expired in July, we
did not replace it. In normal times,
we would have leased another
vehicle. Instead, the plan is to just
pay cash for a good, clean, older
used car that hasn't been to the
moon and back in terms of
Fixed Ops Journal
mileage. We are, apparently, not
alone in adopting this strategy.
Clean used cars - even from
interred brands such as Saab, Pontiac, Suzuki, Isuzu and Mercury -
are a hot commodity these days. You can hit eBay Motors and find
15-year-old snow-belt-driven vehicles from these and other brands
that have 150,000 miles on the clock with asking prices between $3,000
and $5,000. Even the good ol' "beater with a heater" is commanding
what I would call serious cash these days.
Opportunity amid uncertainty
IHS Markit last month released a study on the average age of
America's cars. One in 4 vehicles you pass on the road is, on average, 16
years old or older, and the average age of all vehicles is now at a recordhigh 11.9 years. IHS says this is because of slower sales during the
pandemic, higher new-car prices (the average price of a new car in
June was $38,530, according to Kelley Blue Book, up $1,141 from a year
earlier) and the fact that vehicles last longer.
These older cars, I believe, present a profit opportunity for fixed ops
directors at a time when business in the service lane can be
unpredictable because some customers are delaying repairs and
maintenance work. I think a solid business could be built by
dealerships offering high-mileage cars around 10 to 15 years old that
have been certified by factory-trained technicians and come with a 90day warranty.
This would be more than just replacing tires, brake pads and other
regular-wear items, giving the car a good detailing and putting a price
tag on the windshield. I'm not suggesting the full reconditioning that is
done with off-lease cars. Minor cosmetic defects and wear-and-tear of
trim items are expected on older used cars.
Instead, techs would do a compression check to ensure each cylinder
is within factory specs. They would pressurize the cooling system to
check for leaks. They would ensure the oil pressure is within factory
specs. These tests establish that the engine is in good condition.
Used vehicles can be more attractive to customers who are being
conservative with finances during the COVID-19 pandemic.
The transmission can also be checked to demonstrate that it is
shifting properly and that its internal components are in good
condition. The alternator, starter and ignition systems can be checked.
Techs also would inspect the metal brake and fuel lines, which often
rust when cars get older, and other critical safety components.
Trust in the dealer
For me, there's a certain trust that comes with buying a used car from
a franchised new-car dealer. I feel I'm not going to get an unsafe car.
And it's worth paying a small premium to know that the vehicle has
been inspected and that technicians examined the critical items. Most
techs, I believe, would not let a used vehicle go out for sale if they
wouldn't put their own family in it.
Older secondhand vehicles may be too old for banks to finance, but a
growing number of Americans are socking away cash during the
pandemic. This spring, the U.S. Bureau of Economic Analysis said
Americans' personal savings rate reached 33 percent in April, the
highest the agency has ever recorded.
We have cash on hand, and we plan to spend it when we find the right
used vehicle. I've gotten over the psychological hurdle that I am likely
going to buy something with more than 100,000 miles on the odometer.
But I am OK with that as long as the vehicle has passed through the
service department at a new-car dealership.
Fixed Ops Journal - August 2020
Table of Contents for the Digital Edition of Fixed Ops Journal - August 2020
Fixed Ops Journal - August 2020 - FIntro
Fixed Ops Journal - August 2020 - F1
Fixed Ops Journal - August 2020 - F2
Fixed Ops Journal - August 2020 - Contents
Fixed Ops Journal - August 2020 - F4
Fixed Ops Journal - August 2020 - F5
Fixed Ops Journal - August 2020 - F6
Fixed Ops Journal - August 2020 - F7
Fixed Ops Journal - August 2020 - F8
Fixed Ops Journal - August 2020 - F9
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Fixed Ops Journal - August 2020 - F14
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