In 2024, dealerships encountered several challenges, including rising costs, a transition to Electric Vehicles (EVs), and issues with the used car supply chain. Despite these obstacles, car dealerships approached them from a position of strength, benefiting from strong cash resources accumulated in previous years. The goal for 2025 is to enhance EBITDA and cash flow by achieving strategic and operational excellence. This will employ a back-to-basics approach, further improved by leveraging accurate dealership analytics from automotive business intelligence solutions.
In 2024, RWA Automotive benchmarked our customers at an operational level and we have identified the top 3 areas for car dealerships to focus on in 2025:
Despite the widely discussed limited long-term prospects for the Aftersales department, there is significant potential for improvement in the short to medium term by setting smart targets and executing them effectively. Through our benchmarks, we have identified several areas of opportunity, particularly in parts margins and discounts, workshop efficiency, and notably, the percentage of vehicles undergoing a Vehicle Health Check (VHC). The disparity between these overlooked areas and those that are proactively managed can amount to hundreds of thousands or even millions of pounds for a top 100 dealer group.
Most of the top 200 dealer groups in the UK utilise pricing algorithms to set the prices of their used cars. A favourable depreciation environment is enabling dealers to achieve consistently strong profits. Profits can even be realised from older electric vehicles (EVs) as well. This strategy is expected to remain beneficial for dealers through 2025.
The bigger challenge lies in sourcing vehicles, as demand is outstripping supply. Our automotive business intelligence solutions now include automatically scanning the marketplace to suggest low-priced vehicles that meet the dealers' needs, as well as examining the service department to identify vehicles that are due in and fulfil these requirements.
The goal is to drive the volume of the right kinds of vehicles to meet or exceed used car profit targets. Our benchmarking indicates that smart strategies should focus on setting these targets by considering volume targets, purchasing cost-to-market percentage targets, and days-to-sell targets to achieve maximum results.
The F&I sector has experienced significant disruption in 2024. Maintaining consistency and an ethical process is crucial for regulated products. However, there are also several unregulated products that provide benefits to consumers, which may not be receiving adequate attention. Our benchmarking efforts reveal that some groups are performing significantly better or worse than average for each key product type. Establishing a consistent process and reporting against industry benchmarks will be a valuable task for 2025.
In summary, It's essential to track all operational KPIs for your Salespeople, Technicians, and Parts & Service Advisors on a single page to achieve operational excellence. Managers need to be freed from tedious data collation tasks so they can focus on proactively managing actual performance, identifying opportunities, and handling exceptions.
RWA’s automotive business intelligence solutions encourage a proactive approach that will help to avoid reactive problem-solving at all levels of the business. To learn more about how our automotive BI solutions can help your car dealership in 2025, click here.
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