$3,000 average front gross profit. Yep, you can do it.

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.

As good as that all sounds 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. Stealing trades will become the norm and new car volume will go into the tank because you are reluctant to step up.

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. Stay tuned for part 2 next week when I’ll give you some realistic tips for actually improving gross profit. Look for part 2 in 2 weeks.That’s all I’m gonna say. Tommy Gibbs

One of the more interesting things I’ve discovered over the years is that unless a dealership has a really large body shop or does a big job in wholesale parts, that the difference between the used car inventory and the parts inventory runs about 75%.

In other words, if you have $1,000,000 tied up in used cars you probably have less than $250,000 tied up in parts. Now here’s the most amusing part. Every dealership has a dedicated parts manager. Not every dealership has a dedicated person handling used cars.

It is not unusual for someone to be serving double duty and sort of handling used cars. Sometimes it’s the desk manager. Sometimes it’s the sales manager. Sometimes it’s the general sales manager. Sometimes it’s the general manager.

The conventional skills we once looked for in the person managing our used car inventory have no doubt changed over the years, but what hasn’t changed is that somebody has to “own the department.” Without ownership the department is left to run itself.

Using my example you have a dedicated parts manager managing a $250,000 inventory that actually goes up in value each day.

On the used car side you have $1,000,000 tied up going down in value each day without a dedicated manager.

You might be sitting there saying, “Hey, wait a minute that’s not our dealership.”

Sometimes even when you have a dedicated manager, they aren’t dedicated.

Either way this might be you. That’s all I’m gonna say, Tommy Gibbs

Many of us in the automobile business talk about aged units. For most people an aged unit is one that’s over 60 days old. Some of the more forward thinkers cut it off at 45 days. If you’re one of them, count me as a raving fan of yours.

In my workshops I often talk about aging out. Aging out is a term you should start to include in your thinking tool box.

Aging out happens at about the 30 day mark. In other words the unit is starting to age out because it has seen its most profitable days go by.

For those of you using my 30/30 spreadsheets you know there’s a substantial difference in gross profit in the first 30 days compared to the last 30 days.

Units that are aging out deserve your utmost attention in order to prevent them from aging. Once they have aged it’s too late to do anything except watch your average gross profit go in the tank.

Pay attention to “aging out.” Stay out of the tank. That’s all I’m gonna say, Tommy Gibbs

Try sorting your used car inventory by cost or investment with your most expensive units at the top of the page. Print it out. Now sort your used car inventory by age. Print it out.

Compare the two pages. The odds are pretty good that a lot of your aged units are also listed on the top of the page you sorted by cost or investment.

You should be looking at and analyzing this list every day.

With a few exceptions, you should be pricing your most expensive units under the market and on the most problematic ones you should consider paying bonus money on them, regardless of the number of days in stock.

Sometimes we do things in this business bassackwards. When units start to age on us we sell it for little or no gross and pay the sales person a $500 bonus to make it go away.

In many cases you would be better off to price them tight to the market and pay a bonus on them on day 1 rather than day 61.

That’s all I’m gonna say, Tommy Gibbs

Did you watch the Super Bowl on Sunday, February 5, 2017 between the New England Patriots and the Atlanta Falcons? Even if you didn’t watch it, for sure you’ve heard about it by now.

If you watched it on TV did you see the look of desperation in the eyes of the Atlanta players and coaches late in the 4ith quarter and during the overtime?

Did they look confused? Did they look lost? Did they look like a team headed for the wrong side of the biggest comeback in sports history?

The winner and loser of this game wasn’t based on any one play, one penalty, one catch, one fumble, one interception, one sack or one call from the coaches’ box.

It was based on preparation, experience, and a bunch of little plays along the way.

Your used car business is the same deal. Dealers and managers often have that look of desperation on their faces when they haven’t prepared well, don’t have the right experience and miss a bunch of little things on their way toward age inventory, wholesale losses and low grosses.

You have to decide if the pain of preparation and doing the little things every day, is better than the pain of regret that you will have by not doing so. Winning and losing is based on a lot of little things.

You get to pick. That’s all I’m gonna say, Tommy Gibbs

The odds are pretty good that gross profit from new car sales isn’t going to get any easier. There’s a greater supply of inventory hitting most lots than in recent years. As supplies increase there will be more incentives put on the table and even more pressure to “turn and burn.”

As inventories increase, the greater the heat there will be on dealers to turn the inventory. That pressure will become magnified with the demand from the manufacturers to capture market share.

Dealers will feel the stress of being put on probation by their represented franchises. Maybe it’s not called probation for your brand, but we all know the heat the factory can put on us.

Floor plan interest rates may be headed up, which will add to the angst of many.

Every day the consumer gains an advantage, as technology is added to assist them with their price search of new vehicles.

The stress to turn more new units will cause more and more dealers to put new car prices online. Dealers will compete that much harder via pricing, and grosses will continue to suffer.

Many models will be sold for zero gross with a heavy reliance on F&I, doc fees, trades, etc. Many dealers are already selling new cars at cost or below.

Most dealers are tuned into fixed operations and many are already at full capacity due to facilities and the lack of qualified technicians.

The best bet for many of you is to improve your used car business.

If you don’t believe that to be true all you need to do is look no further than the movement of the public companies such as Sonic, AutoNation and others. You will see that they are ramping up their used car operations by setting up stand alone operations, much along the same model as CarMax.

Improving your used car business has many challenges tied to it; none any greater than improving front gross profit, which isn’t likely to happen given the state of used car pricing online.

Your best opportunity to improve your used car business is to improve your volume. Clearly understand that to improve your volume means your average gross profit is likely to go down.

Keep the following in mind:

You cannot spend average gross profit.
You can spend total gross profit.

That’s all I’m gonna say. Tommy Gibbs