A Valid Complaint?

I realize human nature is that people like to complain and want to blame someone for their inefficiencies. What do you think the number one complaint is I hear from Sales management when I’m in dealerships?

Yep, you’re right, the service department. Sometimes it’s subtle, sometimes it’s blunt, often tempered with an excuse or apology to dare complain about it.

If you review history, you know that one of the reasons dealers charged full retail from the service department to the used car department is very much the same reason why they implemented packs back in 1942. I have no idea if it was in 1942, but I thought it sounded good.

Sales managers have historically worked from cost up and it has made dealerships a lot of money over the years. Therefore, if we can add higher cost to the cost of the used car the sales manager will still generate whatever their happy place is in gross profit.

This argument isn’t as valid as it once was because we have internet pricing and more and more dealers have a “one-price,” non-negotiating mindset when it comes to used car pricing. It’s amazing what the law of supply and demand can do to our thinking.

You can think what you want, but as time has progressed, the used car department has become an easy mark for the service department.

It’s not only the amount they are charged, but also the time it takes to get the car in and out of the recon operation. Used car managers will tell you they get charged for things that they don’t need fixed, and things that need to be fixed often are not.

Almost everyone in the business today understands how crucial speed is to being successful. The lack of speed and efficiency in your service department as it relates to used vehicles is killing your ability to do volume and make the money you have the potential to make. (Shameless plug; my recon tool can help you.)

Creating speed and becoming more efficient should be your number one priority as you move into the second half of the year.

I like relating our business to sports. Today’s athletes are bigger and faster than they have ever been.

With profit margins starting to decrease, your business needs to emulate sports. You must get bigger (sell more cars) and become faster and more efficient than ever before.

In CarMax’s Annual Report from a few years ago under the section “Discovering Efficiencies” it states:

“Eliminating waste from our reconditioning processes has contributed to a year-over-year improvement in our gross profit per used vehicle sold in 12 of the last 13 quarters, while still preserving the competitiveness of our pricing. At the end of last year, we noted that our targeted efforts allowed us to achieve a cumulative reduction in average reconditioning costs of approximately $250 per vehicle, while still maintaining our high-quality standards. While actual reconditioning costs will vary based on sales mix, these sustainable savings are now embedded in our cost structure.”

Here’s the bottom line: If you can become more efficient, more streamlined, and take better control of the cost of repairs to your used cars then doesn’t it stand to reason that you will be able to sell more cars than you are currently selling?

And maybe, just maybe it all starts with a more efficient and effective appraisal at the front door. Didn’t see that coming did ‘ya? That’s all I’m gonna say, Tommy Gibbs