As dealers rethink where future profit will come from as new car margins come under pressure, John Hogan, co-founder and chief executive at business intelligence and data analytics expert RWA Automotive, tells AM that used cars, aftersales, data-led retention and AI-enabled decision-making will become central to profitability.
Why should dealers be focussing on used cars and aftersales right now?
Used cars and aftersales are moving in different directions, so both need active management. Used cars are increasingly becoming the main profit centre so the dealers applying real rigour to stock turn, margin and days-to-sell are the ones that will pull ahead. Aftersales is the opposite challenge. Norway, where almost all new cars sold are EVs, shows where the market could head. The dealer groups performing well there have widened their offer beyond their own brands and have reclaimed areas such as tyres, glass and accident repair that had often been handed to independents. The lesson is to broaden revenue streams, not simply defend what is already there.
What are the key indicators that show whether a used car operation is being managed with sufficient rigour?
The first sign is whether the business is actively forecasting during the month, not just reviewing performance at month-end. That shows teams are being held to account in real time. Regular policy reviews against valuations are also critical, as is making sure those policies are being followed consistently. The other major indicator is overage stock. It remains the Achilles heel of used car operations and needs constant attention. Even small, consistently applied measures can make a significant difference. A £10 environmental charge across 10,000 customers, for example, creates £100,000 of additional bottom-line profit across a group. The key is consistency. These initiatives need to be part of the daily routine, with the right information available to check whether service advisors or branches are applying them properly.
Which income streams are dealers most likely to overlook or under-execute?
We are still seeing gaps in F&I, with quite a bit of inconsistency in how it is being delivered. Service plans are also underrated. The income is not always immediate, but they create significant value further down the line by supporting retention and future workshop activity. Admin fees are another area where execution can be inconsistent. We also see missed opportunities where sales teams are not working closely enough with their own service departments to source used car stock.
How should dealerships be using data to spot whether a new revenue initiative is actually being applied consistently across the business?
It comes back to daily routine. Any new revenue stream needs to be tracked as part of the daily operating rhythm, so managers can see which salespeople or service advisors are applying it and where it is being missed. A group league table can also be powerful. The strongest performers usually want visibility and recognition and that sense of internal competition can be a real driver of consistency. The important point is that data should expose behaviour while there is still time to act, not simply confirm at the end of the month that an initiative has failed.
Customer lifetime value and retention – how central is that becoming?
Customer lifetime value and retention are becoming increasingly central for dealerships. With EVs, customers do not need to visit the dealership as often, which gives them more opportunity to drift away. A retained customer is one who services with you, part-exchanges with you and buys from you again. They are worth far more than a conquest customer or a cold prospect.
Where do dealers typically suffer most hidden margin leakage?
One of the biggest areas is used car retention. Most dealers have long-established processes for following up with customers, but those processes have not always been properly measured. That means businesses may assume retention activity is working when the data tells a different story. There is also leakage in marketing cost attribution. Dealers are only now starting to properly measure the difference between the cost of winning conquest customers and the cost of retaining existing ones. That distinction matters because conquest marketing has become a major expense, while retained customers are typically much more profitable to convert.
What does a good retention hit list look like, and what customer behaviours should it be based on?
Dealers generally track funded vehicles because finance companies help them do that, but cash buyers are often not tracked with the same discipline. That creates a retention gap and a missed opportunity. So a good retention hit list should include every sold vehicle, not just financed cars. That matters because many retailers sell two or three used cars for every new car, and more than half of used cars are typically bought without finance. In many cases, a dealer may have more used cash buyers than total new car customers, yet very few businesses are looking at them properly. Once those customers are tracked, the opportunity becomes clear. Retention rates can range from around 20% among average performers to 40% among the best. That difference can be worth about £100,000 per dealership, which means significant profit is being left on the table.
Diversifying, retaining, broadening the offer needs resource, but dealers are under cost pressure. How do you square that?
A lean, information-driven team is far better than a larger team operating partly blind. Good teams cannot manage what they do not know but once they have the right information, they can drive efficiency much more effectively. A smaller, better-informed team can often do a stronger job than a larger team that lacks visibility over performance, process and opportunity. Headcounts may need to reduce, but the real issue is making sure everyone in the business is working with the best possible information.
You mention data and information a lot – where does AI fit into this?
We have around 25 people with data science degrees at RWA, so AI is already part of how we work day-to-day. From a customer point of view, the industry has moved towards a best-of-breed systems environment. Dealers are using DMS platforms, showroom systems, aftersales systems, used car valuation tools and service plan systems, all of which need to talk to each other. Our role is to do the difficult job of reconciling that information and giving retailers one version of the truth. AI then has two clear uses. The first is a chatbot-style interface, where users can ask natural language questions of their data, such as which cars are losing money or which vehicles need attention. The second is giving retailers secure access to their own reconciled data through tools such as Claude or ChatGPT. We do that through an MCP server, which acts as a secure gateway into a dealership’s commercial data sitting in our system. That means retailers can start joining the dots between different parts of the business. They might ask whether they have enough people working to sell a certain number of cars, or whether staffing levels are too high for the volume being handled. Our job is to be the most trustworthy part of that picture, so retailers do not have to second-guess the data they are working from.