How To Increase Dealer Profitability With These 19 Strategies

After the pandemic, many auto dealers found their profitability had improved, even if their sales had decreased. This was mainly due to reduced inventory and fewer sales transactions, which allowed dealers to focus on increasing their profit margins rather than their sales volume. As a result, they learned how to maximize their profitability by running a tighter operation and getting more from each vehicle sale. But as conditions in the automotive market return to normal, it’s time to again focus on increasing dealership sales and profitability. This means learning how to improve dealer profitability to weather any future storms. This article will offer valuable insights to address your goals, like learning how to increase dealer profitability with these strategies.

One way to increase profitability at auto dealerships is with AI for car dealerships. AI helps dealerships operate more efficiently and saves employees time on repetitive tasks. This allows dealerships to get back to focusing on sales and improving the customer experience, both of which will help boost dealership profitability.

Understanding Dealer Profitability

Dealer profitability in 2024 continued its return to earth, but with a softer landing than many expected. According to full-year data from the Presidio-NCM Average Dealership Performance Benchmark, the average U.S. franchised dealership saw a 24.4% drop in net pretax profit compared to 2023. That’s still a decline, but it’s an improvement from earlier in the year and signals what many call the tail end of the “Great Normalisation” in auto retail. Despite lower margins, especially for new vehicles, average store profits remain 1.7 times higher than in 2019, showing how much stronger the post-pandemic baseline has become. Inventory levels are improving, revenue per store is inching upward, and optimism returns as dealers head into 2025.

Smart Strategy and Efficiency: Key Drivers for Dealer Profitability in 2025

Brand and location now matter more than ever. Luxury dealerships have better margins and more substantial new and used vehicle profits than domestic or import brands. Still, standouts like Toyota, Subaru, and Honda prove that performance isn’t only about luxury; innovative production and incentives make a big difference. For dealers, 2025 could bring a rebound, but only for those focused on cost control, operational efficiency, and smart alignment with their brand’s strategy.

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How To Increase Dealer Profitability With These 19 Strategies

1. Boost Your Sales with Product Knowledge

Understanding the cars on your lot is key to making sales. You don't need to be a tech whiz or a mechanic, but knowing the basics is crucial. What should you know? It depends on your customers. Basic engine power and fuel consumption knowledge is usually enough for those looking at used family cars. These buyers often focus on practicality and everyday use.

In-depth knowledge is essential for car enthusiasts. They ask detailed questions about performance, special features, and handling and value a deep dive into the car's specifics. In either scenario, being well-informed makes a big difference. It builds customer trust and helps you match them with the right vehicle for their needs.

2. Personalize Your Offer & Interactions

Personalization in sales is more than a passing trend; it's a fundamental shift in how businesses interact with customers. Buyers expect to be treated like individuals, not statistics, and those expectations extend to car buying.

Compelling statistics back this emphasis on personalization. A survey by Epsilon found that 80% of consumers are more likely to purchase when brands offer personalized experiences. In car sales, this means going beyond the standard sales pitch.

Sales teams should strive to understand each customer's specific requirements and financial constraints, offering vehicle options and deals that align with their preferences. Communication should also be personalized. Instead of generic messages, emails, and conversations should reference vehicles the customer has shown interest in or speak directly to their unique needs and preferences.

3. Be Responsive to Your Customers

The ability to quickly and effectively address customer inquiries, concerns, and feedback can significantly impact your car dealership's reputation and sales success. You should be reachable through various ways, like:

• Phone calls
• Emails
• Live chat
• Social media

Make sure you're constantly checking these so you can reply quickly. It's also essential to listen to what your customers need and want. Respond to them as fast as you can and try to solve their problems. This shows them you care about their business and want to make them happy.

4. Try Being an Advisor Instead of a Seller

Consider the car-buying experience from the customer's perspective. One salesperson immediately pushes the latest, most expensive models, without asking about the buyer’s needs. The result? The customer feels unheard and overwhelmed.

Now, imagine a different approach: a salesperson starts with a conversation. They ask about the:

• Customer’s commute
• Lifestyle
• Budget
• Fuel efficiency
• Safety priorities

Then, they recommend vehicles that match in price and purpose. There’s no pressure to close immediately; they offer support and insight.

From Pitch to Partnership: Building Trust Through Consultative Selling

This is the foundation of consultative selling. It shifts the role of the salesperson from seller to trusted advisor. It’s a strategy built on listening, aligning solutions with customer needs, and creating lasting relationships. This approach, supported by structured scripts, can guide conversations toward trust and conversion even in cold outreach scenarios.

5. Find Your UVP. Differentiate Yourself From Your Competitors

Your UVP answers the critical customer question: Why should I buy from you? Understanding and effectively communicating your dealership's Unique Value Proposition (UVP) is essential in differentiating yourself from competitors.

A well-defined UVP guides your marketing efforts and gives your sales team a powerful tool to attract and retain customers, setting you apart in the competitive car sales industry.

6. Use the Latest Sales Tools & Systems

In a digital era, car dealerships can't afford to lag in adopting the latest sales tools and systems. Embracing technology streamlines the sales process and enhances the customer experience.

From digital showrooms to CRM software, these tools help manage leads, customer relationships, and sales processes more efficiently. For instance, a CRM system can track a customer's journey from the first website visit to the final sale, providing valuable insights for personalized follow-ups.

7. Go Digital. Be Present on the Web & Social Media

In the current digital era, having a strong online and social media presence is vital for car dealerships. It's not just a marketing strategy; it directly influences sales performance. Sales teams can play a crucial role in this digital transition. The resource investment depends on the scale and depth of digital engagement.

Basic social media presence requires minimal resources, while a more comprehensive digital strategy will require a higher investment, including:

• SEO
• Content marketing
• Paid advertising

8. List Your Business In Online Directories

Another way to bring in customers is to list your dealership in popular online directories like Yelp, Yellow Pages, and Google+ Local. You should include information like your address, website, and opening hours. Listing your business can improve your SEO and make you more visible to people looking for a car or dealership.

You should search for automotive business directories as well as general directories. Ideally, you want ones that let you list your business for free. You could also use an online reputation management company to manage and update your listings.

9. Optimize Your Website For Search Engines

You must use search engine optimization (SEO) for your dealership to rank on search engines. After all, 75% of companies say SEO is very effective for achieving their marketing goals. You should use a keyword tool like Google’s Keyword Planner to find keywords relevant to your target audience.

Long-tail keywords can be particularly effective for SEO. Shorter keywords like “car dealership” have more competition since many businesses use them. Long-tail keywords like “Audi car dealerships in London” are more specific and easier to rank on search engines. So, people are more likely to find you.

10. Position Yourself as an Industry Expert (And Become One)

As someone who's probably sold more cars than the average Joe has driven, you know a bit about them. And even if you're stepping into the world of car sales, you always bring something unique. Each piece of car wisdom you share acts like a beacon, beckoning potential buyers with the message, “Got car questions? I have the answers.”

If you're the go-to for solid car advice, they'll likely seek you out when it's time to buy. It's not just about attracting website visitors; it's about establishing yourself as the top car expert. Elevating your status in car sales is about more than just enhancing your image. It's about becoming a trusted, sought-after destination for customers who value your insight and flock to your dealership for their next purchase.

11. Work on Your Upselling and Cross-selling Strategy (or Create One)

Any good sales professional knows that the key to increasing revenue is not just making the initial sale but maximizing the value of each transaction (and customer). Just like offering a phone case with a phone, in car sales, this means presenting additional options and services that complement the primary purchase. In car sales, upselling involves encouraging customers to purchase a more expensive model or trim.

Cross-selling refers to selling additional products or services, such as extended warranties or maintenance packages. These strategies require training and a deep understanding of the product line. Systems that track customer preferences and purchase history are also useful.

12. Diversify Your Offer

Expanding your inventory to include a variety of models, from eco-friendly EVs to luxury vehicles, caters to a broader customer base. Diversification also means exploring different services like:

• Trade-ins
• Leasing options
• Flexible financing plans

Diversifying requires significant investment in inventory and the development of new services.

13. Diversify Your Sales Strategies. Combine a Healthy Mix of B2B and B2C

Are you selling cars mainly to consumers or businesses? Most car dealers focus on one of the groups but ultimately sell to both. Balancing your sales approach between individual buyers and business clients is key to selling more cars. Business clients, like companies looking for fleet vehicles, often focus on practical aspects such as:

• Bulk purchase discounts
• Ongoing maintenance costs
• Vehicle reliability

They're usually harder to sell to but tend to buy a few cars at once.

On the other hand, individual buyers typically pay more attention to the car's price, features, design, and available financing options. Don't overlook the groups you usually don't focus on or sell much to. You may not sell to them as much because they're not on your radar. For example, if you're mainly dealing in budget-friendly used cars, small local businesses nearby might be in the market for an affordable truck for their day-to-day work.

14. Be Bold. Try Out Innovative Ideas

Sometimes, the key to selling more cars isn't to follow the tried and true but to break new ground. Innovation in sales strategies can range from adopting the latest tech solutions to creating unique customer experiences. For instance, virtual reality (VR) test drives could be a game-changer, especially when promoting models that aren't yet available at the dealership. Or consider hosting community events at your dealership, like family fun days or car care workshops.

These events draw people to your location and help build a community around your brand, fostering loyalty and word-of-mouth promotion. Another innovative idea could be partnership marketing. Collaborate with local businesses or influencers to extend your reach. For example, partnering with a popular local café to offer a “Test Drive and Coffee” event could attract a new segment of potential buyers.

15. Launch an Educational Workshop Series

Hosting educational workshops is a unique way to engage customers and establish your dealership as a trusted resource. Offer sessions that provide value while subtly showcasing your services.

Ideas include:

• Car Care 101: Teach basic maintenance like checking oil or tire pressure.
• New tech demonstrations: Highlight features of modern vehicles, like advanced safety systems.
• Seasonal prep classes: Share tips for winterizing vehicles or summer road trip readiness.

Educational workshops help create opportunities for customer engagement and position your dealership as a partner in their automotive journey, fostering long-term trust and loyalty.

16. Reward Loyalty with Exclusive Programs

A loyalty program is a proven way to encourage repeat business while showing your customers how much you value their patronage. Offering perks tailored to your clients' needs keeps them returning for more.

Consider including:

• Free oil changes or routine maintenance after a set number of visits.
• Discounted services for long-time customers.
• Exclusive early access to sales or promotional events.
• VIP perks like complimentary car washes or priority scheduling.

Reward programs enhance the customer experience and incentivize buyers to choose your dealership over competitors, fostering trust and long-term loyalty.

17. Provide Transparent Pricing and Financing Options

Customers appreciate honesty and clarity, especially regarding pricing and financing. Outline all costs, financing options, and service packages clearly and in a way that’s easy to understand. Transparency builds trust, helping customers feel confident about buying or using your services.

Consider:

• Providing written estimates for services upfront.
• Offering easy-to-read financing breakdowns with no hidden fees.
• Explaining promotions or discounts in detail.

When customers feel treated fairly, they are more likely to return for future purchases, boosting retention and loyalty.

18. Focus on After-Sales Service to Retain Customers

Customer engagement doesn’t stop once the car leaves the lot. Following up after a sale is key to keeping your dealership in customers’ minds.

Offer exceptional after-sales services, such as:

• Free maintenance checks within the first few months.
• Discounts on future services or accessories.
• Exclusive invitations to service workshops or events.

Providing support and addressing any concerns post-sale strengthens relationships and turns one-time buyers into lifelong customers.

19. Expand Product Offerings

Diversify your inventory with the help of a dealer management system to cater to a much wider variety of client needs and budgets and increase the chances of making a sale.

Core Factors Of A Successful Dealership

Vehicle Sales: The Heartbeat of Dealership Profitability

Vehicle sales represent the most visible aspect of your dealership’s performance; these numbers often generate headlines. While selling vehicles is essential, running a dealership is not always the most profitable part.

New cars typically have slim margins, while used vehicles often have more flexibility for earnings. Still, inventory that sits too long can quickly eat into margins. The key is turning cars around efficiently, pricing them right, and ensuring your sales team can move them.

Operational Costs: The Unsung Hero of Dealership Profitability

Dealers can have the best vehicle sales numbers in the world, but without a solid operational strategy, they won’t stay on top for long. Operational costs include the everyday expenses that can quietly erode profits if left unchecked.

Rent, payroll, advertising, utilities, the list goes on. Smart dealers constantly evaluate where they can optimise costs without compromising service or sales quality. Tech tools, outsourcing certain functions, or even renegotiating supplier contracts can make a real difference.

Inventory Management: Avoiding Overhead and Obsolescence

You don’t want too much stock, and you don’t like the wrong stock. Poor inventory control leads to cash being tied up in vehicles that don’t sell. Using data to forecast demand, understanding your market, and regularly reviewing your lot helps keep inventory lean and in demand.

Customer Satisfaction: The Key to Repeat Business

Loyal customers are more likely to come back for:

• Servicing
• Buy their next car from you
• Refer others

And while brand loyalty in the auto sector is strong (14.31 on the brand loyalty index), it’s not guaranteed. Dealers must:

• Build trust
• Deliver a strong after-sales experience
• Stand out in a competitive market

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Key Trends In Car Dealerships To Watch Out For

Revamping Customer Service to Boost Profitability

Car buyers today are picky. They want to feel valued and appreciated. When they don’t, they take their business elsewhere. This is especially true when it comes to auto service. Customers want to trust that their vehicle is in good hands, and if they’re unhappy with the auto dealership’s customer service, they’ll find another dealership to perform the needed work.

To win back customer trust and satisfaction, consider investing in additional training, leveraging technology, or upgrading equipment to tackle these common complaints head-on.

The Power of Online Reviews and Social Proof

Gone are the days of relying solely on a salesperson's pitch to make purchasing decisions at dealerships. This approach often leads to skepticism due to perceived biases and a lack of transparency. It also creates bottlenecks in the buying process as customers seek more trustworthy sources of information.

Many of today's car buyers are highly informed because they conduct extensive research online before visiting a dealership. Online reviews and social media recommendations are integral in influencing both dealership selection and purchasing decisions. A positive online reputation is crucial because it builds trust with potential customers. As such, car dealerships should actively solicit customer reviews and promptly address negative feedback. They must also leverage social media platforms to showcase their inventory and engage with potential buyers to build trust.

Sustainability and Electric Vehicles (EVs)

Environmental consciousness is a growing concern for consumers, driving a surge in interest in eco-friendly vehicles. Electric and hybrid cars are gaining traction. They produce zero tailpipe emissions, greatly reducing a company's overall environmental impact, primarily when it invests in renewable energy sources to power its charging stations. Dealerships that want to incorporate these types of vehicles should prepare accordingly.

This means providing EV infrastructure, such as charging stations on their lots and offering knowledgeable salespeople trained to address EV-specific questions. Auto dealerships should also incentivize sustainable choices by promoting government rebates and emphasizing the long-term cost savings associated with EVs.

Providing a Seamless Omnichannel Experience

Today's car buyers expect a seamless omnichannel journey that blends digital convenience with in-person service. From virtual tours and online test drive scheduling to manufacturer configurators that let shoppers customise their ideal vehicle, digital tools now shape much of the decision-making process.

Yet the physical dealership still plays a critical role in finalising purchases. The key is integration, ensuring that online interactions translate smoothly to the showroom. For example, a customer who builds their vehicle online should find it ready for a test drive upon arrival. Dealerships that align digital and physical touchpoints deliver a more personalised, efficient experience, driving customer satisfaction, loyalty, and long-term retention.

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