Is There a Tariff Tornado?

Here’s the headline and first sentence from Automotive News published on July 2, 2018:

“Tariff tornado: Prepare for impact”

“A 25 percent tariff on imported vehicles could chill new-car sales, devastate dealership profits and trigger job losses at stores, dealers and their advocates say.”

Let’s assume that this is true. Let’s assume that tariffs of any type have the potential to hurt the automobile business.

Isn’t a pack a self-imposed tax? Aren’t you adding a cost to your unit that does nothing for the unit?

It doesn’t make it prettier.
It does make it run better.
It doesn’t add one lick of value.
It doesn’t help you sell the unit.

I fully understand all the “whys” of adding packs. They have served us well over the years prior to the advent of the Internet, and prior to dealers using pricing tools to market their inventories online.

Every day that goes by, you’re moving more and more toward becoming a one-price dealer whether you want to or not. And, whether you like it or not, you’re moving closer and closer to not paying sales people on gross profit.

Paying sales people on gross profit doesn’t make a lot of sense when management has already set the price online and there’s less and less negotiation going on.

If either or all of those statements are true for you, then please tell me how taxing yourself makes good business sense?

If you find a shred of truth in what the media has been reporting, then you must agree to the following: tariffs have the potential to hurt sales because of the added cost to items.

That being true, then how can you deny that your “Pack Tariff” isn’t hurting you when it comes to buying and selling used cars?

Let’s assume that you’re in a state that has a sales or titling tax. And, let’s assume the state drops the sales tax for all dealers except you. Would you be at a disadvantage? Of course you would.

So why do you want to keep putting yourself at a disadvantage by having a “Pack Tariff?”

Think how much you can help morale and help your sales if you could do away with taxes. Stop taxing yourself. That’s all I’m gonna say, Tommy Gibbs

It’s Over

Can you believe it? The year is half over. Time really does fly, doesn’t it?

How was your June? How have your first six months been? It’s July. Half the year is gone. Kinda scary isn’t it?

Some of you have had a great first half. Some of you, not so much.

Some of you have been running full speed ahead. Some of you have been dragging through the sand.

Something has been holding you back. There may be some legitimate excuses, but maybe you just had the wrong plan in place. Just because you had the wrong plan does not mean it’s too late to fix it. You’ve still got 6 more months to go.

Those of you who have had a good first 6 months need to be cautious of becoming complacent. Even though things have been going well, you would be very smart to review how you can make things better as you tackle the second half.

Everything we do is about choices. You can choose to let things be as they are or you can choose to dial it up a notch or two.
To do so means to review your plan and the strategies you have in place. And, make the changes that are necessary to get you where you know you need to go.

Your other choice is to do nothing. Go sit in your office and stare at the wall. Enjoy your seat and pretty soon it will be over, Tommy Gibbs

Things You Should See

We’re currently in the soft launch stage of my UpYourGross software. I’m not writing this today to sell you on using the software, but I want to share a couple of things I continue to observe with our early users and the current data.

It is stunningly remarkable the difference in grosses on:
Trade-ins
Auction Purchases
Rental Car Purchases
Customer Acquisitions

Our top performing dealers realized they must turn the auction purchases faster with less gross. Same thing for rental units. They understand that by and large they can go back and buy some more. Turning these units faster at some gross is far better than sitting on them thinking you’re going to achieve the same type of gross that you will on a nice trade-in.

It is further stunning to me to see that there are dealers sitting on units that are over 60 days old and trying to make a profit. The root of that mindset is that every once in a while a miracle will happen and they actually make some money on an aged unit. God bless you if you can do that, but it’s a safe bet that the ROI is going in the tank even if the miracle happens.

It would be very wise for you to pay attention to the grosses you are trying to achieve on the various sources of your inventory and to take a look at your pricing on units that are starting to age out on you. That’s all I’m gonna say,

Which Rule Should You Follow?

Absolutes are a powerful tool toward creating a disciplined organization.

The downside of absolutes is it chokes off the potential to have an acceptable exception.

Exceptions break the rule of discipline.

Exceptions soon become the norm.

When exceptions become the norm chaos breaks out. The type of chaos I’m referencing isn’t actually like a bomb going off. This chaos is slow and gradual, often not recognized, and then – whamo – there it is, its ugly face screaming at you, “What the heck happened?”

Now here’s the real deal for those of you looking to become

better leaders. You can have absolutes and exceptions in the same house. They can actually hang out with each other once in a blue moon.

True leaders can use them both and chaos will never show its ugly face. Granting an exception and going back to absolutes is very doable.

The problem with leadership is that very few leaders have the skill to make effective use of them both.

Most people in leadership positions are stuck with one or the other.

At any given moment one is just as bad as the other. That’s all I’m gonna say, Tommy Gibbs

When Will You Stand Up?

When you’re in business you have a ton of issues to deal with. None are more important than communicating with staff and management to help them improve performance and profitability.

When you’re in a dealership day-to-day it’s like living with family members and therein lies the problem.

It’s difficult to hold family accountable.

There’s tons of data for you to sort through each day to help you create a roadmap of accountability. You often ignore it and look the other way because you don’t want to lose your family members.

Actually, sometimes it is family and that can be a whole other can of worms.

Let’s apply this to real life. Since you can’t fire or excommunicate your children, if your child isn’t doing what they need to do, don’t you at least try to point out a better direction for them? Don’t you try to coach them for greater and more positive results?

The problem is a lot of people see the word “accountable” as a negative word. When you’re holding people accountable you should be using it as a tool to coach them to the next level.

It’s about pointing out those things they may be missing that you’re able to spot because of your experience and all the data you have at hand.

People don’t do things because either:

A. They don’t know what to do.
B. They know what to do and refuse to do it.

As a leader you’re responsible for making sure they know. Once they know you’re responsible for making sure they do it.

When are you going to stand up? That’s all I’m gonna ask,

All Stopped Up?

You might be constipated. When you’re constipated, it’s virtually impossible to be as productive as you might otherwise be.

Exercise, drinking lots of water and in some really bad cases taking a strong laxative can often relieve the problem and get you back on your “A Game.”

Having 60-day-old plus units in stock is a lot like being constipated. 60-day-old units will make you sluggish and hold back your potential to be as productive as you might be.

You can never perform your best when you’re all stopped up. Your “A game” will never show up when you have used car constipation. Think of it as Poop in the chute.

Until you get the water out of your used car inventory, you will never be but so good. You will have a few good months, but unless you commit to a good diet of solid processes you will always struggle.

One of the best ways to fix the problem is to reappraise the entire inventory, extract the water, give each unit a new birthday and put in my “Life Cycle Management Process.”

Constipation makes you stinky. You don’t want to be stinky.

Having aged units makes you stinky. Don’t be stinky. Constipation is fixable. Aged inventory is fixable. When you fix it, you feel better. When you feel better, you make more money.

If you give a hoot you’ll clean up your poop. That’s all I’m gonna say, Tommy GibbsTommy Gibbs

But What?

Anything you say before the word but is totally meaningless, a waste of time and energy. Here are some examples:

“I have a great used car manager, but I can’t get him to understand why ROI is important.”

“Sam is a really smart guy, but he just won’t get with the program.”

“Dave is a great buyer, but we never make money on the cars he buys at the auction.”

“Marsha is a great used car manager, but we have a lot of stuff over 60 days old.”

“I know we need a photo booth, but we don’t have enough space.”

“We have prices posted on our used cars, but they don’t match the prices we have on the Internet.”

“My used car manager is a great closer, but he doesn’t understand how to price used cars.”

“Curtis is a nice guy, but makes poor buying decisions by buying too many high dollar cars.”

“Bob is a hard worker, but he makes a lot of stupid decisions.”

“My used car manager is one of the best in the business, but we’re only getting 5 turns a year.”

“Carol is a great service manager, but I can’t get her to understand the importance of used cars to our overall profitability.”

“My general manager is super smart, but his people skills are horrible.”

“My used car manager is really tight with all the wholesalers, but I question why we sell them so many units.”

Using the word “but” is just a way of you making excuses for people and things you have failed to take action on.

That’s all I’m gonna say, Tommy Gibbs

The Ticking Time Bomb

Most dealers and managers have come to understand that speed is critical when it comes to making money on used cars.

If you are committed to 60 days or less (which you should be), then any days in the assigned life-cycle of a unit when it’s not available for sale is a killer.

The question often comes up, “When does the clock start ticking?” Does it start with the actual day you own it, or does it start when the car goes on the lot/online?

The issues that often come up are the delay in getting vehicles from auction sites and those units we can’t sell for legal reasons such as we don’t have the title as required by law in some states. There are certainly times when a needed part is delayed and/or a vehicle spends weeks in the body shop.

Let me make this as clear as I possibly can. It starts the moment you own it. Period. No exceptions, no ifs, ands, or buts.

If you want to trick yourself by assigning a different date once the car’s online then go ahead; it’s your store you can do what you want. But, what you can’t do is change the math.

It is what it is. It’s a depreciating asset. The clock starts ticking the minute you own it. Do the math. The ROI is going south.

It’s a ticking time bomb. That’s all I’m gonna say, Tommy Gibbs

Two Lists

One of the things I encourage dealers and managers to do in my workshops is to sort their used vehicle inventory by cost or investment, with the most expensive units at the top. Then I teach them 4 specific ways to attack their 10 most expensive units.

One of the more interesting but not surprising things we’ve observed over the years, is that if you lay your aged inventory side by side with your 10 most expensive, the two lists have a lot of the same units.

Another fact is that the longer a unit stays in your inventory, the less gross and the less ROI you make.

You would think the more money you have tied up in a unit, the more money you would make. If you actually think that, you would be wrong.

Adding to that problem is another well-known fact that the longer the more expensive units sit, the worse the ROI is going to be.

So go ahead and lay your two lists side by side and validate what you already know.

Here’s one final fact. We often know things, but look the other way. When you look the other way, you’re just being stupid. Don’t be stupid. That’s all I’m gonna say. Tommy Gibbs

Zinger-Study Nature

I recently sent out a one-question survey asking if “price sells used cars.” The response was amazing and the results have been tabulated. Over 90% of the surveys said yes. Those that said no or checked “other” said things like:

Price generates interest, but you still have to sell the car.

You still have to show value.     

Only if the unit is standing tall.

A main component, but not the only factor.

Perceived value matters.

Price doesn’t necessarily sell the car but causes it to get viewed.

The talent of the salesperson matters once they get to the store.

A better question would have been, “Does price drive traffic to your store?”

However you want to slice and dice it, price either sells vehicles or it drives traffic to the store.

Since this is an undeniable truth, why would you have any units over 60 days old? Isn’t it also a fact that the longer you keep a unit, the less gross you make on it?

My conclusion is there’s a price that someone would have paid for the unit much earlier in the life-cycle if you had just priced it right. By going away faster, you make more money.

This isn’t rocket science. It’s part of the fundamental laws of nature. Study nature. That’s all I’m gonna say, Tommy Gibbs