It scares me when a dealer hires a buyer. It’s always done with good intentions, but more often than not it doesn’t have a happy ending. The buyer I’m talking about is the one the dealer is putting on the road to go off to wonderland to buy cars. Months down the road the dealer is stuck with a lot of aged units and wonders what happened?

It scares me when a dealer makes a wholesale profit. There are rare sets of circumstances when it can be done. Maybe the dealer cut his/her teeth in the wholesale business or maybe they run an in-house auction for the junker units. But other than that, there aren’t many legitimate reasons for making a wholesale profit.

It scares me when a dealer tells me “We never miss a trade.” I understand the intent. It’s the right thinking no doubt, but never think for a minute that you don’t miss trades. Everybody misses trades. I’m thinking if you’re making that wholesale profit you might be missing more trades than you think.

It scares me when a dealer hires a new used car manager and turns ’em loose. They come on board with great stories of how much they have accomplished at their previous stores. (Notice, stores is plural.) So, the dealer says, “Go get ’em.” What should happen is the dealer or GM becomes Siamese twins with the new used car manager for next 90 days. Every minute that the dealer can spare should be spent with this used car manager listening, teaching, learning, coaching and sorting out fact from fiction.

It scares me when a dealer doesn’t know what their oldest used car in stock is. Better yet, the used car manager doesn’t know. To add insult to injury no one knows where it’s parked. These are your sickest children. How can you not know?

It scares me when a dealer tells me they get units through service and recon in 3 days. There are some that do. Most don’t and most don’t really know. The best and worst answer is the same. “I don’t know.”

It scares me when a dealer has a belief that it’s ok to keep used vehicles for 75 or 90 days. I might understand it if we wre living in the 1970s. Back then maybe we just didn’t know any better. How can you not know better in today’s information society? How can you not understand the fact that you don’t make money when vehicles sit that long? How can you not know you’re working with a depreciating asset?

I’ll tell you what I know. A lot of things scare me. That’s all I’m gonna say. Tommy Gibbs

I realize this may not be a fit for some of you. And yes, there are some who believe this is old school, old fashioned and

outdated. But, there are some who can make this work. And if it helps someone sell a few more units, I can handle a little criticism.

Memorial Day is about 30 days away, and it’s not too soon to be thinking about putting on a Memorial Day sale.

Consider Having An Onsite Tent Sale:

1. Put the tent up as close to the road as possible. Pick the best strategic position on your lot.
2. Put tables and chairs in the tent.
3. Put ALL of your people in the tent.
4. Everybody goes in the TENT!
5. Work all deals in the TENT!
6. If at all possible, move your computers into the tent and do F&I in the TENT.
7. Hang banners from the TENT saying “TENT SALE.”
8. Promote it with Direct mail and/or with a “private invitation” only deal for Thursday before you kick off your regular ads.
9. Do anything you can to make it look like a circus.
10. Rent those jumping air things for kids.
11. Balloons and more balloons.
12. Pop Corn, Sodas, Hot Dogs.
13. Lots and lots of spiffs for your sales people and managers.
14. Do a great kick off breakfast on Thursday for your staff.
15. Don’t do it just for the sales staff; get as many of your employees involved as you can. (Feed everybody lunch every day of the event as well.)
16. Send out memos and emails to all employees explaining in detail what’s going to be happening.
17. Rope off special parking for customers. Hire an off duty police officer or security guard to direct them.
18. Answer the phone XYZ Dealership Tent Sale in Progress.
19. Do a fundraiser at the same time for the local little league or whatever.
20. Post the event on your website.
21. Do an email blast to all your customers advising them of the sale. If your CRM system is sophisticated enough make sure you tell them you need their specific trade and will pay top dollar for it during the sale.
22. Giveaways generally don’t do much except cause people to show up to get their gift and leave, but having people register for a free car is a good way to get info on them when they show up. Pick out a $1000 or $2000 car and give it away.
23. Along that same line, give the salesman who registers the winning ticket some sort of prize. Gift card, $200, whatever floats your boat.
24. Make up a bunch of signs like real estate signs that say “Tent Sale in Progress” and put along the grass in front of the dealership.
25. If you’re close to the interstate do some signs with arrows and put them up close to the ramp. (Oh come on, the worst that can happen is they make you take them down.)
26. Rent a chicken suit or some kind of character and have them walk up and down in front of the Dealership with a placard that says “Tent Sale in Progress.”

It’s not complicated and it’s not expensive. You just have to be creative. Get some of your key people together and throw some ideas around.

That’s all I’m gonna say, Tommy Gibbs

It’s been a tough winter for some of you. Spring is finally here. Trees, flowers and your excitement about the “selling season” are starting to bloom.

If things are going to bloom, or better yet boom, for you, then it might be a good time to put the RE into effect:

1. RE-evaluate-Take a minute and go walk your lot. Take the blinders off. First thing you have to ask yourself is “Does it look like Nordstrom?” Ok, maybe it’s not going to look like Nordstrom, but does it look like Walmart after a big sale? You know, everything is just thrown everywhere. Let’s do a little checklist:

Are the vehicles in straight lines? (Used Car 101)
When was the last time the entire lot was rotated?
Are you using angles to display your inventory?
If you are using license plates, do they all have one or do some have them on the front, some on the rear and some not at all?
Do they all have your decal on the rear of the vehicles?
Do you have fresh FTC stickers on each vehicle?
Do you have fresh window stickers on each vehicle?
If you have other decals or markings on the windshields, do they all have same or similar markings?
Do they all have pricing hang tags? Are some lying on the floor?
Do they all have at least a quarter of a tank of gas in them?
Are they nasty, dirty on the outside?
When the public rides by or pulls onto your lot can they easily identify where the used cars are?

2. RE-focus-To be successful in the used car business you have to be well focused on it and be totally committed. Your entire management team has to understand your commitment to the used car business. This doesn’t happen through osmosis and a meeting every six months. When I say entire management team I mean just that. All Sales, F&I Management, Service Management, Parts Management, Body Shop Management and the Controller. Little Johnny, the lot attendant, needs to be a part of this as well. For the next 60 days, meet with these key staff members twice a week to discuss where you are and where you’re going. Tuesdays and Fridays are best. Make sure on Fridays that they are all included in a lot walk. Do not miss a used car on this lot walk. Every car in your inventory must be touched. If it’s in service, touch it. If it’s in prep, touch it. If it’s in the budget center, touch it. Everybody touches it. You will come across issues you never knew were there and better yet you will solve them immediately. (Don’t let anyone miss these walks.) Make sure a part of that conversation includes everyone knowing how much money you have tied up in used cars and how many of those dollars are over 60 days. Yes, they need to know the dollars, not just the number of units. Make sure they also know what percentage is dead money over 60 days. Example: You have $1,000,000 in used. $600,000 is over 60 days. Make sure they understand that 60% of your money is dead and eroding fast.

3. RE-Recon-Take every unit over 30 days old back through a recon process. (You’ve already missed your best window of opportunity to make gross; that would be the first 20 days.) Most of them should not need mechanical work done, but if they do, get it handled. Most importantly, put a full clean up back on them. Whatever you have to spend, it’s going to be worth it.

4. RE-Invest-in yourself and your management team. Do something to gain some knowledge. Hire me, visit CarMax, or visit a dealer friend in another state that does a good job in used. Attend a workshop. Join a Twenty Group. Join a Used Car Twenty Group. Do something besides sitting there and waiting for something to happen. You may think you already know all there is to know about the used car business and you will just be wasting your money. The fact is maybe you actually know a lot, but you need something to jar your brain and get it going again. You have become real good at talking the talk, but you may not be walking the walk.

5. RE-think- your management team. Do you really have the right person running your used car operation? Yes, that person may have been with you for years. Loyalty sometimes equals mediocrity. Maybe they have some great skills, but the fact may be that you are not making the best use of their talents. Used car managers today have to be “Asset Managers.” It is not a matter of just being a “Car Guy.” They have to have a good blend of common sense and ability to make use of technology. In my travels, about 75% of the dealers have the wrong person managing their used car operation and they wonder why they are not maximizing their full potential? (Even if you have the right person, they have to have the right tools, processes and your full support to be successful.)

Yep, it’s all about the “RE.” I’m RE-minding you about all the stuff you need to be paying attention to. That’s all I’m gonna say, Tommy Gibbs

It’s pretty much a given that we need to speed up the selling process. The one step that we need to be conscious of when it comes to speeding up is the used car appraisal. Far too often we are short-cutting the appraisal and in the end it costs us big money.

It doesn’t take that much longer to do it right. There are four parts to the appraisal:

1. The customer’s self-appraisal
2. The technical
3. The show
4. The presentation

The Self-Appraisal-Require the customer to show you their car. Ask the right questions. The more you ask the more they will tell. Generally the more they tell the more they help to de-value their vehicle in their own mind.

The technical – You drive it. You park it. You walk it. You check it. You open the hood. You open the trunk. You snoop it. (Look for treasures in the glove box.) All of this takes place away from the dealership.

The show – When you bring it back to the dealership, park it in a conspicuous place and put on the show. You touch everything you can touch hoping that the customer sees you touching those scratches, dings, and tires. The show can be done before or after your appraisal ride. The key is that you need to do it when it’s most likely the customer is watching. Even if the customer doesn’t see you, hopefully the sales person sees you. Now that they know what you know, hopefully they will work harder on selling the customer than on selling you.

The presentation – This is critical. It doesn’t have to be done by management, but it’s more effective when done so. Part of the presentation is the paper work. A detailed printout, with comparisons and supporting documentation will have a powerful impact on the customer’s thinking. Think of the presentation as a sales presentation for the justification of the value.

Speed is important, and at the right time so is slowing down. There’s a term in the racing world called “slowing down to go faster.” In this case slowing down will make you more deals and more money. That’s all I’m gonna say, Tommy Gibbs

Whether you’re buying cars at the auction, trading for them at the front or buying from the public, the number one reason you can’t acquire more used cars is that you won’t pay the price.

It’s that simple. You and your used car manager can spin it any way you want, but the bottom line is when you or they see a car that you would like to have on your lot you will not step up and pay the price. There are logical reasons for this, most of which need to go away.

Let me dissect this deal for you. The odds are pretty goodthat your internal labor rate is $75 to $125 depending on what part of the country you are in. Your average reconditioning costs are running $800 to $1400 depending on a couple of things.

One of those things would be that you are in the “Newscar” business as opposed to being in the “Used Car Business.” Oh, I know you think you are in the used car business, but you aren’t. “Newscars” is when you carry a lot of late model stuff.

Sure your recon cost is lower because you’re not spending a lot of money on these cars as they still have factory warranty. (Bad strategy that happens when your used car manager gets tired of getting killed every time he/she sends an older car into service.)

Or, if you are a big time “Certified Dealer” then your cost per unit would be higher because of the factory requirements.

So let’s round the reconditioning number off to a nice $1000 per copy. (Do your own math if you don’t like mine.)

The next part of this dissection is those wonderful little packs you add on to protect yourself from paying too much in salesman’s compensation and other little safeguards you feel you have a need for. I come from the “Pack Generation.” Always loved them. The business has changed. I’ve changed and you should change too. (Many of you think I’m against packs. I’m not. If they are working for you I say “Keep using them,” but I question if they are working as well as you think they are.)

On average, hard and soft packs combined run $500 to $1000. So let’s round that number off to $800. When you add my little rounded off numbers from the reconditioning and packs you have a total of $1800. (The problem with the pack and recon “drug” is that it still sorta works and you can’t shake ‘da habit.)

So as I often say, “Here’s the deal.” You are starting off from “jump street” with an $1800 cost disadvantage against those dealers who aren’t doing it the old fashioned way. (CarMax and Texas Direct to name just two of them.)

We can debate the way you charge the sales department in service all day long. But your theory of if we don’t charge them full retail (or close to full retail) that they will just give it away in the sales department is “old, tired and a worn out” theory. (I know, I know, it’s still sorta working.)

You cannot continue to rely on the sales department to prop up the service department. Sooner or later the folks in service are going to have to get better with how they sell and develop your customer base.

Propping up service is much like the unemployment checks people have been getting the last few years. As long as the government keeps handing them checks then there isn’t much sense in them getting out and looking for a job.

What compounds the problem is your pay plan. As long as you keep paying sales people and sales managers on gross you are going to fight a losing battle. Yes, this is a hard one for you to get your head around, but sooner or later you gotta “get real.” There’s a total cultural change coming. You can lead it or follow it. It’s your choice.

Just think about it for a minute. You put killer used car prices on the Internet and now you’re starting to put killer new car prices on the Internet. Aside from doing the right things when the customer shows up, how much control do the sales people and sales managers really have on gross profit? Ok, they have some, but not as much as they used to have.

What if you changed the pay plan and took gross out of the equation? Under that scenario what you charged in service and the need for packs would be irrelevant.

What if you thought of reconditioning as simply another line item expense on your statement just like you think of advertising or supplies? Keep in mind this article is all about “Why you can’t buy more cars.”

If reconditioning and packs were not screwing up your “cost basis” then you could absolutely buy more cars and no doubt you would sell more because you would be in them right and have a pricing advantage over the competition. When I say you can buy more cars, I’m also talking about buying more “trade ins,” which obviously allows you to make both more new and used car retail deals.

There is no doubt this is a difficult cultural shift for your business just like what’s happening to you with the Internet moving you towards “One Price.” You’ve been successful doing it the “Old Fashioned Way,” but you are going to find it harder and harder to do so.

I’ve asked this question a lot lately: What if you had a clean sheet of paper and started over from scratch; how would you do it in today’s world? That’s all I’m gonna say, Tommy Gibbs