Archive for October 2017

The Reconditioning Problem

There’s not a week that goes by that I don’t get several calls from dealers struggling with reconditioning of used vehicles.

Either that it takes too long to get a car done and through the system or they are paying too much to get it done. Often they complain about both.

Most of these problems can be fixed if the dealer really wants to fix them. The dealer has the power to fix anything they want to fix. A simple step to improve the situation is to hire a “Chaser.”

A “Chaser” will gain you a few days in recon and reduce your recon expense by a couple hundred dollars per car.
Maybe even more on both ends.

A Chaser is someone who does just that. They chase the used cars through the system. This is not a high paid position; somewhere in the $3000 range per month. It’s a person who has solid mechanical knowledge, good people skills, attention to detail and the ability to communicate with the sales department and the service department.

Think of them as being in an assistant manager category. It is not the same as having a dedicated service advisor or used car technician. Far better.

The chaser has a single-minded focus with no other agenda. They will never let a car sit for even one day while it waits to go from service to clean up. If clean up is backed up they will start kicking and screaming to find a solution, whereas the service adviser is thinking “next” in terms of his/her own next repair order opportunity to make some money.

The Chaser is an employee of the sales department but spends most of their time in service. They need to have a certain amount of approval authority so they can speed things up for you.

I often hear dealers say they already have that, as they give the service department the latitude of spending X dollars per car without having to get approval.

Really? Let’s say you give them $800 without asking any questions. I can promise you, you’re going to get a lot of $800 tickets. It’s human nature.

That’s like the sales manager who says I’m only going to accept a $1000 deal. Well, you’re going to get a lot of $1000 deals. People take the route of least resistance. You won’t see too many $500 deals and you’re not going see too many $2000 deals.

The Chaser needs to have enough mechanical knowledge to know when to hold them and when to fold them. They won’t let the wool get pulled over your eyes.

They are there, in part, to protect and assist the used car department with the ultimate goal of speeding things up.

Part of their pay plan might be based on average recon cost and the average number of days to get a car to the front line. Of course, you have to be careful that they don’t go too far on the saving money part.

You’ll be able to tell if your policy account and complaints go up, so don’t be too concerned if you elect to make it part of their pay plan.

The chaser is going to gain you some days in recon by doing…well, just that. They are chasing the cars through service. They chase the cars and they push the cars through each station. If things get backed up they are looking for a solution on how to make it happen.

Many dealerships rely on the used car manager, service writer or, in some cases, the service manager to handle these duties. Most don’t have the time, expertise or focus to make it happen.

You may be sitting there reading this thinking, geez, I don’t want to have to hire any more people. I get that, I understand that.

I have a question for you. How much do you have to save per car in recon or gain in days through recon for the Chaser to more than pay for themselves? That’s all I’m gonna ask, Tommy Gibbs

How Hurricane Harvey Has Affected Used Car Prices

Auctions prices all over the country are on the rise. Without a doubt, the culprit in the rise of high prices is Hurricane Harvey. Dealers from the storm-ravaged areas are traveling far and wide acquiring inventory at record-breaking prices.

This sort of activity has a snowball effect on pricing for all dealers regardless of what part of the country you might be located. So what should you do?

Be cool.
Stay calm.
Don’t panic.
Don’t jump in too deep
.

No doubt, the law of supply and demand is currently increasing the prices you pay and the value of used cars in the marketplace. Keep the following in mind:

A. Know your market and know your lenders. The market may not be willing to reimburse you for the added values, and for sure the lenders may not be willing to advance the money you need to make it work.

B. This is a short-term blip on the map. If you think this is a “new business model” that you’re going to see for much more than 45 to 90 days, you’re going to wake up with an ugly mess.

C. Avoid jumping too heavily into the game. Now is not the time to go nuts at the auctions. Now is the time to go nuts at the front door. Up your look-to-book north of 50%. If you’re going to bury yourself, then bury yourself in a trade. You made a deal. You sold a car. You have a new customer. Dig it?

D. Amp up your disciplines. I feel the same way about the fake news I hear about off-lease cars coming into the market and affecting used car values. If you know what you’re doing, and have discipline, then most of this stuff will have little or no impact on your used car operations.

F. When you turn your inventory, the law of supply and demand will only impact you but so much.

E. Turn baby turn is what you should always be thinking when you purchase auction units, but ever more so as this “hurricane of high prices” passes. The upper level winds will eventually carry it out to sea.

That’s all I’m gonna say, Tommy Gibbs

No Bull Poop

In the 1974 James Michener novel Centennial, he discusses the “Lead Bull” theory. The Indians had to kill buffalo and had to do it without modern-day instruments. So they would get the lead bull running toward a cliff, and the whole group would follow.

The lead bull would be running with such momentum it would be impossible to stop as he approached the cliff. The lead bull would get pushed over the side and all the bulls would follow landing down below. The Indians would come up and kill them and they’d have their food and their clothing, etc.

The problem in your business is often your “Lead Bulls” want to run in a different direction. The more they run in a different direction the more disruptive it is for your younger, less experienced bulls.

It’s not unusual for management to look the other way when it comes to the lead bull. Allowing the lead bull to do whatever he wants is often justified by management because the lead bull is a producer.

The lead bull shows up in many places within a dealership and there is often more than one lead bull within the store and within the departments. It may be your top salesperson. It may be your top sales manager. It may be your top technician. It may be your back counter parts person or it may be someone on the clerical staff.

There are many lead bulls in any given organization.

Your job is to find them, seek them out, corral them, feed them, nurture them, and turn them into the lead bull they have the potential to be, not the lead bull they think they want to be.

Your best approach when dealing with the lead bull is to develop a one-on-one dialogue that allows you to appeal to the lead bull’s ego. It’s important for you to acknowledge to the lead bull that you understand they are the leader and you need their help in order to get the rest of the team doing the things we need as an organization to be successful.

Key words to use with a lead bull are “I need your help.” Your sales pitch to the lead bull is, we need you to follow our processes, not because we think you need them, but because all the baby bulls do. And, if they see you doing them then we all win. There is no doubt the lead bull ends up performing better by doing so. The lead bull has been tricked again.

A lead bull can be a very wild bull. Wild bulls have to be constantly pushed, nudged, and directed. Lead bulls like being around important lead bulls like you. They like being in the “in.” It gives them comfort and fuels their lead bull egos.

Don’t think for one moment you will do a little dancing with the lead bull and they know the steps. The lead bull will want to go back to dancing freestyle in a New York second. Partner dancing is based on Lead/Follow. The Lead Bull will follow you as long as you hold their hand. Turn the hand loose and they will go into freestyle dancing faster than you can say “Geronimo.”

This ain’t no Bull Poop. That’s all I’m gonna say, Tommy Gibbs

Perception

People in top leadership positions that read my newsletters would say they do a great job of investing in their team.

There’s no doubt that a lot of leaders are doing a great job with inspiring and growing their team members. I’m also pretty sure if you asked some of those leaders’ team members if they feel the company is investing enough in them they would say no they aren’t.

Like most things in life, perception is based on which seat you happen to be sitting in. Perception is reality. If you perceive someone to be a jerk, they are a jerk until they do something to change your perception. It’s your job to change people’s perception by investing more in them.

Those who invest in their team improve their odds of winning.

Owners, managers, and supervisors will often ask, “Why should I spend so much money on training people when they are just going to leave?” What happens if you don’t train them and they stay?

I’m not trying to sell you anything. I’m just reminding you about stuff you know to be true.

That’s all I’m gonna say, Tommy Gibbs

Why Not?

I cannot imagine why you would not do what I’m about to suggest.

This may be the simplest and easiest way to improve your overall used car business. Actually it will improve your overall business.

If you’ve ever heard me speak or read previous articles you’ve heard me talk about pressing your average cost per unit down.

Why should you focus on it? Because when your average cost per unit creeps up and the factory comes out with rebates, incentives, low interest rates, or employee purchase plans, you get crushed because you are sitting there with all that high dollar inventory.

The more you press your average cost down, the more used you will sell and the better off you will be. You end up getting in the used car business and out of the NEWSCAR (A word I made up) business.

You end up selling more units with fewer dollars tied up. Oddly enough most of your problem cars go away. Your ability to get on a 45 to 60 day aged inventory goes way up.

There is no set of circumstances you can lay out that negates this concept. So, if you were to say any of the following, you would be wrong:

We do a great job with highline cars. (Irrelevant.)
We do a great job with high dollar pick-up trucks (Irrelevant.)
We do a great job with high dollar SUVs (Irrelevant.)
We don’t have software that can separate our inventory by Cars, Trucks, SUVs and Wholesale Pieces (Irrelevant.)

You should require your used car manager (if you’re the used car manager, just do it) to print the report each morning, circle today’s average cost, and put his/her initials inside the circle and lay it on your desk.

So, what’s the magic number to get to? There is no magic number. Every dealer’s number will be different. If you are at $17,500 today your mindset should be how do you get to $17,000, then $16,500, then $16,000 and so on. The more you press your average cost down the better off you will be.

I find it interesting that when I’m speaking to a group, they think they are hearing me say go out and buy cheaper cars. No, that’s not what I’m saying. I fully realize how hard it is to buy cheap cars. But, what I am saying is it’s not so much about what you buy, but what you don’t buy.

If you are buying a high dollar car you have to buy it with great caution. You need to either have it sold, or have data to back up that it’s going to move fast.

One of the most important things you can do is to quit letting “Bubba and the gang” have your cheaper cars. There is absolutely no reason to not retail any vehicle that has a piece of life left in it.

You can present all the excuses you want, and they are just like the rear anatomy that we all have. You can help the cause by speeding up your recon and reducing the pricing from the service department to the used car department on your cheaper units.

There is no question that if you just pay closer attention to what you are buying and what you are keeping to retail that your average cost will go down. Only good things end up happening.

As you monitor your average cost it is going to bump up from time to time. There are two reasons for this. First, it’s because you traded in some high dollar stuff, which you will naturally have to do and second it’s because you got goofy and went to the auction and bought some high dollar cars.

In both cases it’s a matter of paying attention to it daily and getting back on track.

I’m often asked two questions:

1. What should my target goal be? There is no target, just try to get it lower than the day before.

2. Can I press my average cost too low? The answer is no. Don’t be concerned with that. If you do a good job with $27,000 SUVs, you will still sell $27,000 SUVs, but by pressing your average cost down it just makes you that much better.

Getting better is a matter of making things easy and simple. This is easy and simple. So why not? That’s all I’m gonna ask, Tommy Gibbs