I frequently write articles trying to get you to take certain actions in order for you to avoid having aged inventory.

The more I study the subject and the more dealers I work with, the more I become convinced that there’s very little money being made on anything over 30 days old.

The biggest problem with aged units is the impact on your ability to sell cars today. Nope, I’m not even talking about your ability to price and sell the aged units. I’m talking about your ability to trade for more vehicles as you work new and used car deals.

When you have aged units, there’s a little voice deep inside the dark corner of your brain saying, “Hey, be very careful, don’t step up too much on that trade. Bossman, you’ve got a bunch of other issues out there on the lot and if you step up on this one, you’re just creating more problems.”

It’s not just that you can’t make any money on the aged units; you can’t sell fresh units or new units because your existing inventory keeps your brain all twisted up.

Keep an eye on that dark corner inside your brain. That’s all I’m gonna say.Tommy Gibbs

I often have conversations with dealers and managers about units they have had in their inventory too long and/or those vehicles that might be in the $25,000 to $35,000 range.

I question whether they are profitable or not. For those managers who want to keep units until they can retail them I sorta agree in that I’d like to see you retail them, but faster. I hate dumping retail pieces in the wholesale market.

I’m convinced that keeping them past 45 to 60 days doesn’t make you money unless of course you make a killer gross. I’m also convinced that the longer you keep the more expensive vehicles, the further you erode your profits unless of course you make some awesome grosses which isn’t too likely.

So, here’s the deal…if you disagree with me “prove it.” Yep prove it. Start tracking the ROI on any unit you retail over 60 days old and any unit that you have over $25,000 in.

Come on, bring it on. Prove it to me. Prove it to yourself. Remember when calculating ROI, the standard is to use only front gross and the sweet spot is 110 to 120%. You can use my ROI calculator. Go to FixRoi.Com.

I’m looking forward to you proving me wrong. Bring it on. That’s all I’m gonna say. Tommy Gibbs

The final in a 3 Part Series.

1. Think in terms of improving gross in small increments. Try paying the managers a bonus for achieving nominal increases each month. Start by improving gross by $50 a unit. Do that over the next year and you will see a slow and effective way to increase your gross. You can only eat the elephant one bite at a time.

2. How could I talk about your grosses without mentioning “Life Cycle Management?” Life Cycle Management is designed to help you create a sense of urgency on those cars that are most likely to kill your grosses. The faster they go away the better your gross will become.

3. Track GAP and ROI. When you do, grosses go up. How much are you giving up once the customer shows up at your store with a price from the Internet? If you don’t know then you can’t fix it.

4. Are you stocking the wrong stuff? If the data tells you there are a lot of Impalas being sold in the market then it stands to reason that there must be are a lot of them for sale? And wouldn’t it be logical to assume that it will be hard to make money on those units since there is a high day’s supply? When it comes to making gross, the law of supply and demand is certainly in place. You don’t have to be an economics major to understand this fundamental principle.

5. Shoot the moon on the right stuff. Since the beginning of the car business, higher grosses are driven by some home run cars. You have to understand which ones are home runs, singles, doubles and triples.

Fix what you can fix. That’s all I’m gonna say, Tommy Gibbs

A three part series on improving gross profit.

1. Can you reduce your recon cost? Are you being as efficient as you can possibly be? Does service have carte blanche? Is service still selling the used car department the same old same old?

2. Can you speed up reconditioning? Very few of you really know how long it takes to get a car through service and clean up. Is your sales management team constantly crying about how slow service is? Might be some truth to it. Check it out. “It’s not the big that will eat the small, it’s the fast that will eat the slow.”

3. Re-evaluate your packs. Have they outlived their usefulness? Are packs ultimately affecting your average gross in a negative way? Are they giving you a false picture? Dale Pollak refers to packs as taxing yourself. I think we are all taxed way too much.

4. Have you made an all out effort to convince your sales and management staff to sell the value of your company, your product and the fact that you have the best prices in the market?

5. Re-think what you are stocking and the when, how and how often you tweak your pricing. Far too often prices are not massaged soon enough so you end up pricing your cars at the end of the cycle at crappy grosses. I suggested in a previous newsletter that you go back and review your grosses by age categories. Have you done it yet? The aging units you are selling are killing your grosses.

There are many parts to improving gross profit. Look for Part 3 next week. That’s all I’m gonna say, Tommy Gibbs

Just the other day I was having a conversation with a key manager of a dealer group whose dealer was beating him up pretty badly about his average used car grosses being so low.

Like many dealers, the dealer has either seen numbers in his 20 group or heard of dealers doing big averages. Dealers will often say that they have dealer friends doing as much as $3,000 and higher on the front.

Achieving $3,000 on the front is easy enough to do. It really is. You can do it overnight. Yes, all of you can. I believe in you and I know you can do it.

When dealers are screaming about low grosses they often point to the fact that their cars are priced too low on the internet and therefore the easiest solution is to increase the prices.

The fact is you can improve your grosses dramatically overnight by increasing your prices. I mean really if you don’t ask for it how do you ever think you will get it? Remember you can always go down but it’s impossible to go up.

Yep, that works for me. Raise your prices, ask for more and you will get more. Gross has always been a state of mind. Whatever mindset you are in then you can achieve it.

So, right now, right this minute, right this second, all of you need to stop giving your cars away, raise your prices and the grosses will go up.

Oops, there are a number of little problems with raising your prices.

1. Your used car volume is going immediately in the tank.
2. Your total gross is also going so far south you will lose your butt.
3. Your profits are going to be pooh pooh because you have totally cut off the spigot of cars going through service.
4. New car volume will go into the tank because you are reluctant to step up on trades since you need to steal them to make gross on.

I’ve said this before and I’m going to say it again, doing used car volume and achieving high used car average gross goes against the laws of nature. I’m not saying you can’t improve your grosses, but the days of doing $3,000, $2,500 and in some cases $2,000 are history.

Your best opportunity to improve your overall business is to improve your volume. Improving volume improves business in all your departments.

You can’t spend average gross profit. You can spend total gross profit. That’s all I’m gonna say. Tommy Gibbs