Dealers are compelled to participate in the preowned market — how else can they get consumers to upgrade to a newer boat? But let’s be honest: Getting the formulas right for inspecting, buying, repairing, pricing and selling used boats, not to mention making a good margin in the process, can feel a lot like this morning’s Wordle. Success is anyone’s guess.
To make matters worse, today’s customers are towing their boats into dealerships, wanting dealers to buy them at the same prices (or more than) they paid when the boats were new. The fact of the matter is, used-boat valuation sources seem to suggest that demanding higher prices is warranted. And we all thought new boat prices were out of control.
There’s no question that getting the preowned boat business right can dramatically boost a dealer’s bottom line. Those boats are the lifeblood of the entry-level market. Those first-time buyers are a direct link to repeat business. And a strong preowned business creates a competitive advantage like no other area of a dealer’s business. (Who else has that same pristine make and model boat for sale on their lot?)
Despite all the potential, very few dealerships give the preowned market the attention it deserves. For the savvy dealer, it won’t take much effort to become the dominant preowned player in the marketplace. It just takes the right amount of focus, a good process and a great story for selling preowned product.
Let’s start with the focus. To sell preowned boats, dealers have to retrain their minds (and their teams) to treat preowned as its own boat line. It’s a boat line that will require more effort than any other line in the dealership.
It will be hard work to find good product. Each boat will need a thorough inspection for necessary repairs so there are no surprises after the purchase. Dealers need to understand their marketplace: what customers are looking for, how to value used product when bringing it in, repricing it to sell at the right margin. And dealers need to prep those preowned boats for sale and tell a great story to create market demand.
All of this sounds like a lot, but it really comes down to instilling a proactive approach to finding good, preowned product. By documenting, using and refining such a process, dealers can get better and better at buying, prepping and selling these units at a strong margin. The steps in the process should include finding, inspecting, valuing, buying, prepping, pricing and selling.
Good dealers proactively search for preowned product to purchase. Many are incentivizing their team members to find these boats. They are exploring Craigslist, Facebook Marketplace and other online platforms to find boats to buy. The secret with this step is to do more than wait for someone to come in with a trade-in. Grow the business by securing preowned inventory.
The worst thing to do is purchase the boat sight unseen. Spend the necessary time to inspect the product. The MRAA offers an industry-leading inspection form you can download at cpoboats.com/inspection. Other things the MRAA’s Certified Pre-Owned Boat Program offers are fluid analysis to give you a look inside the engine and transmission, where the most troubling issues could be present, as well as an in-depth report on the boat’s history.
Placing the right value on the boat when you buy it is among the most challenging steps. The valuation guides in today’s market are running high (find out why in our conversation with NADA at MRAA.com/preownedsuccess). The MRAA recommends that you source several sites, including NADA and online classified sites. Remember, used boat prices vary from one market to the next.
Once you’ve determined the value, buying the product at the right price will help you maximize the profitability. Make sure you calculate into your price, whether at the purchase or later at the sale, the cost of the inspection time and any parts or labor for necessary repairs.
Your service department should make sure that the preowned boat is seaworthy, and that all repairs are complete. Your detail department should clean this product so it’s as close to “like new” as possible.
Look to set a strong margin. Prepandemic, leading dealers were getting 25 to 30 percent margins on preowned boats. Again, the rationale here is the competitive advantage: No one else has that late-model, like-new boat with low hours. Make sure you are pricing for profit by including shop time, upgraded parts and so forth.
Marketing and sales should prioritize the preowned product. Use preowned to get new buyers in the door who can’t afford the latest and greatest. Without a focus and a priority on selling these products, all the work you’ve put into capturing the inventory will be wasted. This is also another good opportunity to creatively incentivize your sales team to help make preowned profitable.
The story you need to tell on your preowned boat line is simple: confidence. Preowned boats, by their very nature of being used, instill a certain amount of fear in customers. Where has that boat been? Was it well-maintained? Was it left out in the elements all winter? Did anyone winterize it? Will the engine start? And so forth.
By putting the right amount of focus on your preowned business, and by instituting a strong process to manage that product line, you will be able to demonstrate a high level of confidence. Highlight your inspection and prep process, and differentiate your inventory so you can justify pricing and maximize margins. That way, you can go to market with a message underscoring the peace of mind you deliver through a market-leading focus and process for taking care of your customers.
In getting preowned right, dealers can solidify a competitive advantage and capture their share of the $10 billion preowned boat market. Having the right focus, right process and right story will provide the confidence to make it all happen.
Matt Gruhn is president of the Marine Retailers Association of the Americas.
This article was originally published in the May 2022 issue.