What is car sales management? Advantages and disadvantages for dealerships
28 Feb 2024
Sales management is a strategy that has gained popularity in the automotive sector. Through this method, owners can sell their vehicles without having to deal with the entire process themselves. However, like any other strategy, sales management has its advantages and disadvantages for both vehicle owners and dealers.
What is vehicle sales management?
Sales management is a process through which a third party (generally a dealer) directly takes charge of selling a used car on behalf of the original owner, who remains legally its owner until the final transaction is completed.
The owner hands over their car to the dealer, who displays it alongside other models and takes care of the entire process: from advertising it to handling all necessary paperwork once a person interested in purchasing it is found.
Sales management allows owners to sell their vehicles more quickly and easily, while dealers receive a commission for their services without having to make a large initial investment.
What advantages does sales management have for a vehicle owner?
Sales management offers several advantages for vehicle owners:
Convenience: The owner does not have to worry about finding a buyer, posting ads, or handling legal procedures. The dealer takes care of all this.
Higher visibility: By being on display alongside other cars at a dealer, the vehicle has a greater chance of being seen and purchased by potential buyers.
Price set by the owner: Unlike direct sales, where the dealer sets the final price of the car, in sales management, the owner decides how much they want to receive for their vehicle.
Other advantages include:
Time and effort savings compared to selling the vehicle on their own.
The possibility of obtaining a better price by having the vehicle more visible and reaching more potential buyers.
Assurance that a professional will handle all legal and logistical aspects of the sale.
Coverage in case of damages or problems with the vehicle while under sales management.
What advantages does sales management have for a dealer?
For dealers, sales management also offers significant benefits:
Increase in stock without initial investment: Dealers can increase their stock of vehicles without having to purchase them directly.
Commission from the sale: Dealers earn a commission for each car sold, which can represent considerable income.
Greater offering for customers: By having more cars on display, dealers can offer their customers a broader variety of options.
Other advantages:
Opportunity to sell high-end or exclusive vehicles that they normally wouldn't be able to buy.
Vehicles under sales management attract traffic from potential buyers to the facilities.
Allows evaluation of the demand for different models without making large investments.
What disadvantages does sales management have for a dealer?
However, there are also disadvantages:
Risk of not selling the car: If the vehicle does not sell within a prolonged period, this can generate costs for the dealer (e.g., maintenance and space costs).
Responsibility for the vehicle: While the car is in their facilities, any damage or issues that occur will be the dealer's responsibility.
Other disadvantages:
Investment of time and resources in preparing, advertising, and displaying vehicles that may not sell.
Possible conflicts with the original owners of the vehicles.
Risk of overvaluing a vehicle and then being unable to sell it at the requested price.
How much commission should a dealer receive for a sale?
The commission that the dealer receives for conducting the sales management varies depending on different factors, such as the final price of the vehicle and the specific policies of each dealer. Generally, this commission is usually a percentage of the sale price (for example, between 10% and 20%).
It is important that this aspect is clearly established in the sales management contract to avoid misunderstandings or later conflicts.
Some factors that influence the commission:
Final sale price of the vehicle.
Age and value of the vehicle.
Exclusivity of the sales management.
Timeframe established to sell the vehicle.
Expenses incurred by the dealer (advertising, maintenance, etc.)
Ideally, the commission should be reasonable for both parties: enough for the dealer to make a profit for their work, but not excessive to avoid harming the economic expectations of the owner.
What responsibilities does the dealer have for a vehicle under sales management?
Throughout the time the car is under sales management, it is the dealer's responsibility to keep it in good condition and protect it against possible damages. This includes both its physical maintenance (cleaning, minor repairs) and its security (protection against theft or vandalism).
Moreover, if any problems occur during this period (e.g., if it gets damaged while on display), the dealer will be responsible for resolving it at no additional cost to the owner.
Other responsibilities of the dealer:
Insure the vehicle against all risks while it is under their custody.
Perform the stipulated maintenance and oil changes.
Communicate to the owner any incidents or extraordinary expenses that arise.
Keep the vehicle clean and in good condition.
Take the necessary measures to prevent theft or vandalism.
Proper custody of the vehicle is essential to generate trust with the owner and for its subsequent sale.
Timeframes and payment methods in sales management
The timeframe to sell a car through sales management can vary considerably depending on the market and the specific characteristics of the vehicle. However, once sold, payments are usually made quickly.
Regarding the payment method, it is typically made by direct bank transfer to the owner once the transaction is completed. It is important to remember that this payment will include the corresponding deduction for the dealer's commission.
Recommendations regarding timeframes and payments:
Establish a reasonable timeframe (for example, between 2 and 6 months) to sell the vehicle in the contract.
Agree on a partial payment to the owner in case of excessive delays in the sale.
Agree that the payment transfer will occur 24-48 hours post-sale.
Clearly detail how the dealer's commission will be calculated and deducted.
Setting clear expectations around these aspects helps avoid misunderstandings and guarantees the interests of both the owner and the dealer.
Legal aspects and procedures
Finally, it is worth noting that all legal aspects related to the sale of the car are the responsibility of the dealer. This includes everything from ownership transfer procedures to managing potential claims from the buyer.
Some legal responsibilities of the dealer:
Verification of the vehicle's documentation.
Transfer of ownership at the vehicle registration.
Payment of taxes related to the transaction.
Delivery of documentation to the new owner.
Addressing claims during the legal warranty period.
It is important for the dealer to have trained personnel and the necessary resources to carry out the administrative and legal management of these types of operations.
Advice for dealers for ideal sales management
If you are considering incorporating the sales management of third-party vehicles in your dealership, keep the following recommendations in mind:
Establish clear processes and transparent contracts regarding commissions, timeframes, responsibilities, etc.
Insure vehicles under your custody against all risks.
Maintain proactive communication with owners about the status and sales management of their vehicles.
Train your staff on the legal and logistical aspects involved in sales management.
Streamline procedures and payments as much as possible when a vehicle sale is finalized.
Offer confidence and peace of mind to both owners and buyers throughout the process.
Implementing best practices in sales management processes will increase customer satisfaction and the likelihood of success for this business model.
