Auto Broker SWOT Analysis

One of the key strands of an automotive brokerage business is that they are able to generate substantial gross margins from placing a buyer with a seller of a vehicle. These businesses do not have to take the normal risks associated with selling a car in that they carry zero inventory. Among busy buyers and people seeking specific types of vehicles, automotive brokers are able to provide a very valuable service. The gross margins generated from the successful placement of a broker vehicle are substantial and are usually about 10% of the purchase price. This is a high gross margin business. Once the marketing apparatus that is needed in order to engage in this type of automotive brokering activity is developed, the ongoing operational risks and marketing costs are substantially meliorate it.

As it relates to weaknesses, automotive brokers do have substantial marketing expenditures and that they need to maintain an expansive website that brings potential buyers of vehicles to the business. These companies often have very high pay per click marketing as well as search engine optimization marketing expenditures. The ongoing payroll costs associated with an automotive brokerage are somewhat moderate and these are usually done on a scaling basis as the company expands its revenue base.

As early’s opportunities, automotive brokerages frequently expand their operations by acquiring some inventories of in demand vehicles that are sold directly to customers. Additionally, many of these businesses will frequently increase the scope and scale of their marketing budgets in order to attract a greater number of buyers that can be placed with sellers of vehicles. One of the other opportunities for these businesses is to operate on a commission basis on behalf of specialized car dealerships especially as it relates the high-end sports car market. These businesses frequently work with companies that specialized in classic car inventories as well.

For threats, automotive brokers are very susceptible to negative changes in the economy. However, this can be remedied if the auto broker specializes in working with wealthier buyers that are seeking highly specialized sports cars or classic cars. These individual buyers are far less swayed by negative changes in the economy. The competitive issues faced by these businesses is also one of the major threats that we face on an ongoing basis. However, once an auto broker develops a very strong reputation, this risk is substantially mitigated. 

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