What is a car dealer’s most profitable business? Selling new cars? One would think so, judging by the amount of money invested into metal, marble and glass used to move new cars. But it’s wrong. If a dealer is good, his new car profit contribution is in the single digits. What makes money in a dealership? Servicing the cars. And selling used cars. As Buickman and Steven Lang will confirm: A dealer often can make more money re-selling a trade-in than selling a new car. This must have dawned on someone at Volkswagen …
Moving the jalopies off the dealer’s used car lot should be high on the manufacturer’s interest scale. The more the dealer sells, the happier he will accept a trade-in. Brisk business on the used car lot is good for re-sale prices. Higher re-sale prices are good for new car sales. A dealer who makes money with service and used cars will happily move new cars as some kind of a loss-leader. Keeping a dealer alive keeps your distribution lines open. (Jeez, I used to get a lot of money for this kind of advice. Now you get if free on TTAC.)
Manufacturer support for used car marketing are a fleeting phenomenon. Sometimes they do it. Sure, they usually have a “Certified pre-owned” menu-item somewhere on a website. But do they mean it? Once they have better things to do, like launching a car with a facelifted bumper, support wanes. In times of tight money, all marketing programs for anything else than new cars are canceled. The dealers gasp for air and die. Worldwide branding for a certified pre-owned? Nice idea, often discussed, “I’m all for it if it’s not coming out of my budget.” Many used car campaigns degenerate into selling useless extended warranties.
I’ve done many a used car program in my days at Volkswagen. Come to think of it, one of my first jobs for Volkswagen as a kid copywriter was a campaign that involved a set of Herbie stickers, along with the famous 53 race number, with which dealers could adorn their used bugs that littered the lot, in the year of the Lord 1974. And I still admire the guts of the VW exec who approved the headline “Once a new car leaves the lot, it’s used.”
Looks like someone in Wolfsburg finally put his foot down and found the money for worldwide branding of their pre-owneds. Under the slogan “Das WeltAuto. Used cars you can trust. Guaranteed” Volkswagen “is reorganizing its used car business” says their press release. Kick-off will be in Germany on June 1, 2010, followed shortly after by Russia, Italy, France, the UK, and the USA, with further countries lined up for later.
That took double-guts. Creating a campaign in Germany, for something as mundane as used cars, that gets picked-up worldwide, is short of a revolution at VW.
And then the slogan. “Das WeltAuto” is clearly a variation of the “Das Auto” theme.
I can hear the discussions at the Hochhaus: “Too close to our brand slogan. It’s used cars, for crying out loud.” “Mein Gott! WeltAuto ist mehr als Das Auto!” “What have you been thinking? Have you been thinking at all?” Someone must have put his or her (knowing VW, most likely a his) foot down.
That someone is Christian Klingler, sales chief at Volkswagen who said: “It’s not simply a new name. Our mission is to deliver the performance and quality our customers expect from Volkswagen for our used cars as well. Going forward, there will be clear standards and a comprehensive customer promise at attractive prices for every used car under the ‘Das WeltAuto.’ brand. And that will apply worldwide.”
VW says that with the new ‘Das WeltAuto’ brand, Volkswagen is creating a common platform for all markets, “thereby professionalizing its used car business on a sustainable basis. The reorganization reflects the high significance of the used car business.” Hmmm. Some corporate knowledge must not have gotten lost.
People who buy a “WeltAuto” branded car will be treated closely to new car royalty. The car comes with a comprehensive warranty, you can trade-in your old car for a WeltAuto used one. Customers can even “exchange the vehicle if it fails to meet their expectations.”
Christian Klingler joined the Volkswagen board on January 1, 2010. He hails from Austria, where he held leading positions at Porsche Austria. It’s no coincidence that Das Weltauto was a successful campaign in Austria before it was launched worldwide from Germany.
Since the beginning of Volkswagen, many ideas at Volkswagen originated in Austria. Even a lot of the company’s founders had Austrian roots, as students of automotive and world history will confirm.
Someone in Germany put a capital A into Das WeltAuto, redesigned the logo, and made much more money in 5 minutes than TTAC makes all year. Maybe I should go back.
I always had good luck with my Volkswagens, but I have heard many horror stories from other people who were not so fortunate. VW’s goal may be to sell used cars you can trust, but I think most people would be more impressed if they were to sell new cars you can trust.
“VW’s goal may be to sell used cars you can trust, but I think most people would be more impressed if they were to sell new cars you can trust”
Well said Joe
Once, on a dull rainy day at my Audi dealer, while I waited to have my car serviced, the sales guy I’d dealt with over the years told me how the business “really worked”. He said that they made little on new car sales, especially with the internet allowing everyone to get educated about prices, etc. The money was in used cars, he assured me, because when people trade theirs, they seldom have any frame of reference as to what their trade is worth. Most times, they’re so anxious to get the new buggy that they just shrug when told what they’d be alloed on the old one. So the new car profit might be under $1,000, even with the give-back, but there could well be a $4,000 or more profit left in the used one after some minor detailing. This all sounded right to me since I was pretty sure you couldn’t support the dealershp overhead with slim profits from new car sales and shop work. Is this mostly correct?
Mostly correct, except that the shop work profits can even be higher.
Used is the new new.
If and when the day comes that all cars are equipped with sensors on major components that record wear and according to some algorithm provide a Mean-Time-to-Failure snap shot of the remaining vitality, then buying used will be more straight forward.
Can’t such sensor reports be faked, you ask. Sure, just as today the most fundamental vitality measurement (the odometer reading) can be faked.
But if the sensors were sophisticated, they would likely not be fooled with any more than odometers.
Plus, if such data were reported real-time in a CarFax database, if would be very difficult for a sleazy dealer to concoct an entire fake sensor history many years later.
I’m fluent in Austrian but not in German, so had to look up the meaning of “welt.” I was informed it means world, globe, cosmos, everything, etc. Is that right? Volkswagen is resurrecting Ford’s slogan for the Model T, “the universal car”?
Nah, just the WorldCar. Why they called used cars (a hodgepodge of anything that rolls on the lot) The WorldCar is beyond me. But hey, it worked in Austria.
“…many ideas at Volkswagen originated in Austria. Even a lot of the company’s founders had Austrian roots…”
Bertel, you sly devil, you totally went there, didn’t you?
VW’s CPO program in NA is supposed to be the best. I used it for my present car and am certainly happy with it. And Joe? Unless you drive one, don’t be so quick to throw those lemons about.
I have never bought a used Volkswagen, but I did own a 2003 Jetta GLS and a 2006 Jetta TDI which were both bought new. The ’03 had a few minor issues, but the ’06 was completely trouble free for over 90,000 miles. As I said, I had good luck with my VWs, but I know of quite a few people whose new and used VWs were nothing but trouble.