Which Cars Sell The Fastest

Purchasing a car is one of the most personal buying decisions a person can make. Choosing the right vehicle reflects a buyer’s style and personality.

Only two significant ingredients motivate a person to purchase a particular car or truck: need and product. Car sales are rising after a brutal pandemic, supply chain issues, and inventory shortages. It appears the recovery is here to stay.

Buyer motivations are back in play for every automaker and dealership.

Need

Collectively, car dealerships spend, on average, $8.6 billion per year on advertising, with an average yearly expense of $511 thousand per dealership. Car dealership brain trusts continue to advertise their used cars to consumers who may be sensitive to things such as price or the lack of features on their current car. New car advertising continues to focus on financing, features, and of course, price!

Young buyers are leading the assault on the increase in car buying; however, the primary motivating factor of need cannot be ignored. One of the most significant factors motivating young buyers is the speed at which they can buy a car. Unfortunately, young buyers fall victim to subpar vehicles, high interest rates, and unfavorable terms.

Product

Dealers may advertise zero percent interest rates, or a huge discount; however, the motivating factor that gets a person in the door is the vehicle. In the past, car buyers would visit various dealerships to get a sense of what is available.

Digital marketing has a firm grasp on how people research the car they want to purchase. An impressive 95% of car buyers utilize the Internet during their purchase journey, either at the beginning or confirming details along the way.

Dealerships have a few choices when it comes to building their inventory in the digital age. 1) Offer a massive selection of vehicles, with a wide array of options that appeal to the most buyers. 2) Become the go-to dealership for a specific brand or vehicle, online and at the lot.

Now more than ever, customers know what car they want before walking onto the lot. These buyers want the dealership to facilitate their transactions quickly and efficiently.

Fast and Slow Selling Cars

The pandemic, production delays, and rising fuel costs upended the car industry from 2018 to 2021. Recent automotive production statistics have found that new car inventories are up, and buyers are making the decision to purchase.

On average, used cars sell quicker than new cars; buyers continue to look at the used car market for better value and save money. However, pent-up demand has dramatically increased sales across the used and new car markets.

According to Yahoo, in September of 2023, a new car sat on the dealer’s lot for an average of 22.7 days compared to just 17.5 days from a year earlier. Some dealers report a turn cycle of just 9.2 days on specific models.

iSeeCars, a data-driven research company, reports that another new trend is emerging. Once a global rage, electric vehicles are now experiencing slowing sales for new and used vehicles. Significant price drops are not helping.

New Cars

A recent study by iSeeCars shows a 25.7% increase from 2022 to 2023 in the number of days a new car sits on a dealer lot. July 2022, the average number of days on a dealer lot was 38.4, with an average price of $44,245. July 2023, the days increased to 48.2, and the average price was $45,936.

Fast selling new cars:

• Toyota Grand Highlander-Hybrid with an average price of $56,396, stays on the market a scant 9 days. The Highlander has plenty of interior space and stands out among its competition. A turbocharged four-cylinder hybrid engine brings an impressive 362 horsepower for exceptional performance.
• Land Rover Range Rover remains one of the most popular SUVs on the market and sells within 10.4 dyas.. Refined interior and exterior styling make the Land Rover a truly remarkable vehicle, regardless of year or market.

Used Cars

Rising interest rates and soaring gas prices have consumers turning to used cars to find the best value. Dealership inventories fluctuate monthly, while affordable SUVs and sedans are in high demand. Used car managers know it is vital to source vehicles with historically great resale values.

Fast Selling Used Cars:

• In 2023, the fastest-selling used SUV is the Honda HR-V, sitting on dealer lots for only 34 days. The HR-V is a spirited front-wheel drive SUV with the best resale years between 2019 and 2023. The Honda HR-V can easily reach 150,000 miles or more with regular maintenance. A Honda HR-V’s average days on the lot is 34.4 days, with an average price of $24,496.
• Acura ILX is an affordable luxury sedan at an appealing price point. Acura, as a brand, continues to rank near the top in every significant rating category and stays on a dealer lot for only 35 days.A smooth ride and good fuel efficiency make the ILX a top-selling sedan. The average resale price is $26,091, and it sits on the lot for an average of 35.3 days.

Dealership Profits

Hundreds of quality websites offer the cost of every new vehicle produced, options, and dealer fees. Dealerships are more than happy to negotiate on new vehicles and often have several sales promotions based on a dollar amount over an invoice and other marketing incentives to move inventory.

Dealerships make the most money in the service lane, parts, used cars, and trucks.

According to the NADA (National Automobile Dealer Association), the average gross profit on a new car is 3.9%. This means that for a new car with an MSRP of $30,000, the dealer will make a gross profit of $1170. Deduct the various overhead expenses, advertising, and other expenses, and the poor, sad dealership will not get rich by selling a new car.

Used vehicles, on the other hand, are a different story. According to the 2023 mid-year report from NADA, the average gross profit per used vehicle is $2337. It may seem like a straightforward process of buying low and selling high, but in reality, dealerships have several revenue streams per used vehicle.

There is a lot that goes into making a used car dealership profitable. Buying the right vehicle, reconditioning expenses, and financing play a significant part in the dealership’s success. Experienced used car managers keep a keen eye on the types of vehicles that cross their dealership, from trade-ins, auction houses, and direct purchases. It takes years of training to understand the process of buying a used car for resale and what the reconditioning costs are going to be so the vehicle is marketable.

Financing

Consumers have been conditioned to look only at the front end of a car deal: the vehicle cost, options, add-on accessories, and dealer fees. The hidden goldmine of any dealership is the back-end or the financing. Very few car buyers understand the nuances of automotive financing.

Dealers may partner with conventional financing firms to give their clients better interest rates or terms on specific models. Dealers earn commissions on the number of loans closed or the added interest rate charged to a consumer over what the dealership buys money from the partner firm. Automakers will also offer incentives to the dealership on specific models.

Buy Here-Pay Here dealerships earn money in interest payments on in-house loans and car profits. These dealerships serve the purpose of getting consumers into cars when all other financial avenues have been exhausted.

Final Word

New and used car dealerships are a mixture of complexity and diversification involving several revenue streams. Dealers have various ways to make a profit from the vehicles they sell, to financing, extended warranties, parts, and the service lane. Several of these profit streams are hidden from public view.