Strong ratio of used to new sales pays off

In the wake of the Great Recession, reeling from the industrywide collapse in new- vehicle sales, Mullinax Automotive doubled down on used vehicles.

In 2008, Mullinax's largest Ford store, in the group's Apopka, Fla., hometown, sold just more than a third of the new vehicles it had two years before. At another of the group's stores, in New Smyrna Beach, Fla., new-vehicle sales were sliced in half.

Facing dire new-vehicle sales projections for 2009, Mullinax Automotive co-owner Jerry Mullinax knew the group needed to find a way to keep selling.

"We've always been pretty good at used cars, but we decided to really get better," Mullinax told Automotive News. "We do a lot — a lot — of training and a lot of experimenting."

The efforts worked. Today, the eight-store dealership group is the biggest retailer of Ford-brand certified pre-owned vehicles in the country, and it maintains one of the country's highest used-to-new-vehicle sales ratios among the retailers on Automotive News' list of top 100 U.S. dealership groups ranked by used-vehicle sales. In 2018, Mullinax Automotive sold 14,629 used vehicles to its 10,313 new, achieving a used-to-new ratio of 1.42-to-1. That far exceeds the industry's 1-to-1 gold standard.

Internet leads are the group's primary driver of used-vehicle sales, and pouring energy into online presentation and competitive pricing has boosted the retailer's sales considerably. Pricing tools from software vendor vAuto also are integral to the group's success, Mullinax said.

More than a decade after the recession, dealers are sharpening their focus on used-vehicle sales as new-vehicle sales soften and profit margins shrink. Used-to-new ratios are climbing across the industry, and more dealers are obtaining 1-to-1 ratios or better.

Mullinax Automotive's performance far outpaces the 0.8-to-1 ratio that the National Automobile Dealers Association reported for the average franchised dealership in 2018.

The average used-to-new ratio on Automotive News' top 100 list this year was 0.82-to-1, with 22 dealership groups at or above 1-to-1. That's an improvement from last year when 18 groups on the list reached those ratios, with an average of 0.75-to-1 for all 100.

As dealers slug it out for used-vehicle sales, obtaining adequate used-vehicle inventory is more difficult, Mullinax said."It got tougher in the last couple of years to buy cars because more and more dealers are trying to get into the used-car business," he said. "The more they do, the harder it is to buy used cars."

Mullinax Automotive's ratio was sixth-highest among the retailers on Automotive News' top 100. The company sold 14,629 used vehicles in 2018, up 10 percent, coming in at No. 52 on the list. Mullinax's used-vehicle revenue reached $290.8 million last year, up 15 percent.

Seven of Mullinax Automotive's eight stores represent Ford, and the retailer sold 5,704 Ford CPO vehicles in 2018 — the most in the country, according to a Ford spokeswoman. Mullinax estimated its Hyundai store sells around 30 CPO vehicles a month.

Though finding and retaining service employees has been a challenge at Mullinax and throughout the industry, the dealership group maintains 22 full-time used-vehicle technicians to help prepare and certify vehicles for sale.

Staying on top of process and training is important to keep the retailer's numbers up. Mullinax Automotive conducts weekly calls that loop in each store's general manager, used-vehicle managers and a vAuto performance manager to discuss recently sold inventory and review gross profits made on the vehicles.

Company leaders also look for best practices from other industries. In January, Mullinax invited a friend who manages the Chick-fil-A franchise in Apopka to speak to dealership employees. They asked him the secret to how his drive-through operation ran so smoothly.

The fast-food manager said, "It's just constant, constant change," according to Mullinax. "Constant playing with this or that, and you get a little bit more efficient here, a little bit more efficient there. Next thing you know, it's going really fast."

Mullinax Automotive has internalized this philosophy of constant refinement. Used-vehicle strategy changes adopted and abandoned over the years are too numerous to count, Mullinax said.

But frequent attempts of trial and error have served the group well. One notable success: a five-day money-back guarantee on older vehicles.

"We're not gonna argue with somebody on a $10,000 truck or a $5,000 car. If they don't like it, they can bring it back in," Mullinax said. "Customers have responded to that. We've sold a lot better."