There’s a lot of talk these days about the “Velocity Method” of selling used cars and trucks.

There are some that would define Velocity as: “A method of giving your cars away so as to impact your gross to a point of a substandard amount that will make you want to throw up your hands, beat yourself over the head, and barf.”

My definition for the word Velocity: the whipping boy of the auto industry that can be blamed when we use software pricing tools as the Bible, don’t use our brains and don’t use the tool as it was intended in the first place. Software is a tool. It’s not a genie in a bottle.

I’ve come to believe that the disconnect with the Velocity method of selling vehicles is the thinking that you have to give everything away. That’s just not true.

While I’m a big fan of pricing your vehicles “to the market,” I also believe that you have to be willing to shoot the moon on certain units for some period of time. Maybe it’s 15 days or maybe it’s 20. You know your inventory, you get to pick.

The problem is you often miss the chance to take a shot at making some big grosses because your vehicles are hung up in recon for the first 10 days of their life-cycle. You make your best grosses in the first 10 days or so. It’s as true today as it was 25 years ago.

It can often be painful when you’re trying to move to the “Velocity Method” because you already have a bunch of stuff over 60. The grosses on those units aren’t going to be pretty. And now you’re trying to speed up things on the fresh pieces and the picture gets double ugly.

If you’re trying to get things sorted out, there’s going to be some serious pain to endure. Sort of like getting a bad tooth pulled. It’s not going to get any better until you deal with it.

As you move forward, think about the choices you have:

1. Hold a high gross profit per unit.
2. Improve your volume with lower grosses.
3. Improve your volume and be smarter about gross.

In today’s market, your best chance is going to be #3. The longer you wait to adapt, the more pain that tooth is going to give you. That’s all I’m gonna say, Tommy Gibbs

There’s an old adage that you make your money on a used vehicle when you buy it. It’s a true statement to a point. It certainly stands to reason that if you pay too much, you don’t have a chance. When you buy it right you’re half-way home!

There are times when having a mindset of “buying right” costs you a deal. It happens more frequently at the front door than the auction block. You always over-pay at the auction block, but you try to steal them at the front door.

Stealing a unit once in a while is ok, but if you have a mindset of stealing at the front door in order to “buy right,” you may not be as smart as you think.

One of the best strategies you can put into play is to keep an eye on your look-to-book and press the percentage up. If you’re going to over-pay, over-pay at the front door. At least you sold a unit by doing so.

I’m going to challenge the statement that “You make the money when you buy a unit.”

The reality is you make the real money when you sell the unit. Your ability to market and sell a unit faster is what makes you the most money. If you own it right and it takes too long to get it to the front line, and you fail to price it right soon enough, then you blew the whole “owning it right” concept.

Just because you’re half way home doesn’t mean you’re there yet. You won’t make any money until you’re smart enough to find a retail buyer.

Be smart. Understand when you make the money. That’s all I’m gonna say, Tommy Gibbs

If I get asked this question once a week, I get asked this question 100 times a week. It’s generally phrased as, “We can’t find inventory, do you have any suggestions?”

These are smart, intelligent dealers and managers asking the question. These are people who are true “car guys and gals.” They are not new to the game and they know what end is up, yet they still ask the question.

They know the answer. But they hold out for a miracle that I have a secret tunnel that I can connect them to that has some gold at the end.

To quote my good friend and mentor Dale Pollak:

“The reality is that there are plenty of cars available in the
wholesale market, but the margin opportunity for most is very, very small.”

So there you have it. Dale has spoken and I shall interpret. There’s inventory out there, but you can’t or won’t pay the price.

You won’t pay the price because:

You haven’t accepted the fact that units you purchase aren’t going to have much of a profit margin.

You haven’t accepted the fact that you will need to turn and burn those units.

You haven’t accepted the fact that total gross is more important acceptedverage gross.

You haven’t accept the fact that packs and high recon costs are adding to your woes of paying the price.

You haven’t accepted the fact that paying on gross profit further complicates the retail selling process.

You haven’t accepted the fact that you need to create a greater awareness on look-to-book.

You haven’t accepted the fact that mining your customer base for potential sellers is worth more than a 60-day trial run.

You haven’t accepted the fact that the number one issue of low grosses is you sell too many units late in the life-cycle.

You haven’t accepted the fact that many good things come to the table when you find a retail buyer at some number.

These are just a few of the things you haven’t accepted, that are causing you not to be able to find the inventory you need.

It’s important to know where to buy cars. It’s even more important to know why you aren’t. That’s all I’m gonna say, Tommy Gibbs

“Some people will not change until the pain is so great that they have to.”

One of the more interesting things I see in my line of work is dealers and managers often know they have a problem, but don’t do what’s necessary to fix it. These are smart people with years of experience and plenty of data and information to conclude that something isn’t working as well as it should or could.

They know there’s a better way, but stay on a road named “frustration.” When your staff becomes frustrated, the growth of your organization is stymied, and your bottom line impacted.

The two examples I see most often are:

1. The relationship between the parts and service departments and the used car department. Sometimes it’s the cost of parts and repairs and sometimes it’s workflow.

Never forget that you can’t sell them and make the most money if you can’t get them to the front line in a timely manner. Nothing drives sales management crazier than seeing units sitting out back waiting to go through recon.

A large percentage of the dealers don’t know where the bottleneck is or how long it takes to get units through the system and ready for retail. They know they have a problem, they just don’t know how big it is and how much it’s hurting their bottom line.

Each department is a separate business and there’s pressure on each department/business to make a profit. Therefore, it often feels like our business model, by design, is set up for the departments to work against each other.

2. Overaged used cars. Dealers know it’s not profitable to keep used cars past 60 days. Most know the profit starts to take a serious dip on day 30. Profit and ROI are going south, and the dealer looks the other way. How such intelligent people allow this to go on and on is extremely hard to understand.

Ignoring the problem creates a culture that lacks discipline, which over the course of time will vibrate throughout the store. You cannot win on a consistent basis when there’s a breakdown of discipline.

More often than not we know how to fix the problem. And, more often than not we don’t fix it. We don’t address the problem due to fear. Fear can be real or imaginary. We often fear that if we attack the problem that someone will quit because they can’t live with the new approach.

If you fear asking people to change to something that’s going to make you, them and your organization better, then there may be an even bigger problem that needs fixing. Maybe you need to fix your thinking.

That’s all I’m gonna say, Tommy Gibbs