I’ve always been a big believer in trying to retail everything that has a breath of life left in it. Certainly you have state safety laws to abide by and of course you may have your own standards for safety and reconditioning.

Often dealers draw the conclusion that they don’t want to mess with the older used vehicles because they don’t want to damage their reputation. I’ve never understood that part. The customers buying the older, cheaper units are thrilled to have that vehicle. It’s not going to hurt your reputation.

In case you’re sitting on the fence on a “Budget Center,” ask yourself these simple questions.

1. What about all the parts and service gross that would have been generated on the less expensive cars going through service and reconditioning?

2. What about the fact that you could have put more money in some trades because you intend to retail them vs. wholesale them? How many more car deals do you end up making because you have a better plan?

3. Does the increase in volume from the less expensive units impact the attitude of the sales staff and their ability to earn additional income? Isn’t it true the best time to sell a car is when you just sold a car?

4. What’s the benefit of having someone driving a car, any car, high dollar, low dollar, that they purchased from you?

5. Is there a chance you just sold a car to someone who might never have set foot in your store simply because you had a vehicle at a price point they could afford to pay?

6. Is it possible that this new customer has a friend or relative who might one day come buy something because of the way this new customer was treated during the buying experience?

7. Are the odds in your favor that they may come back for an oil change or other service?

8. Does doing business generate business?

9. What’s the “Return on Investment” on selling these less expensive cars? Relative to the amount of money tied up, aren’t they a far better investment than what you would make with a $25,000 car? How many times in a year can you turn over a $7,000 to $10,000 investment vs. a $25,000 investment?

10. Doesn’t it make sense that if you can sell more cars with less money tied up that it’s a good thing? There really isn’t much of a downside to increasing volume and decreasing investment.

It’s found money, that’s all I’m gonna say, Tommy Gibbs

In a recent workshop, a conversation came up about selling used cars and trucks in volume versus selling for high grosses.

Depending on your definition of high grosses and high volume, the concept of doing both goes against Tommy’s laws of nature.

That’s not to say that there isn’t a happy medium, because if you do a lot of little things right you can achieve a respectable volume and higher gross profits at the same time.
(Life Cycle Management will change your world.)

It’s petty much a sure bet that you’re not going to do $3,000 on the front and sell 300 used vehicles a month, which most people would agree are pretty strong numbers.

Think about it this way; at the beginning of the month you start out with zero gross on the books. It takes a lot of gross to pay all the bills. The name of the game is how fast and how much gross we can pile up.

Does it really matter how we get there?

You can sell 50 units at $1,500 which equals $75,000 or you can sell 25 units at $3,000 a copy and you still get to the $75,000.

I think you know where this is going. In both cases these numbers are plus F&I, plus trade-ins, plus the parts and service work. Plus you now have another customer in your family of customers, who are likely to purchase other vehicles, parts and service from you.

When you think volume, you work harder to step up on more trades at the front door. When you work harder to buy more deals at the front door, you sell more new and used vehicles. When you sell more new and used vehicles, you pile up more gross in all departments including parts and service.

When you pile up more gross you make more money.

Let the piling up begin. That’s all I’m gonna say, Tommy Gibbs

The first of everything in life is the best. Your first love, your first computer, your first car, your first job, your first house, your first management position.

How about ice cream and coffee? The more you eat the ice cream cone and the more coffee you drink the less enjoyment there is. The first taste of anything is always better than the second and so on.

Call it the “The Point of Diminishing Return of Satisfaction.” (I made that up; I make lots of things up, just work with me.)

Used cars are no different. Think of the first day that you own a used car as if it’s the first taste of coffee or ice cream. It tastes a lot better if you sell it on day one than it does on day 61.

The longer your coffee sits, the colder it gets. Not so good. The longer ice cream sits the more it melts and the less ice cream you get to enjoy. The longer a used car sits the less you make on it. The less you make on it, the less enjoyment you get to have.

But even if the coffee stayed warm, and the ice cream stayed cold, your second taste of either is never as good as the first.

You’re going to hear a lot about the “Life Cycle” of your used cars this year. My definition of “Life Cycle” would be how long you allow a car to hang around and more important, what elements impact and extend your “Life Cycle.” The management of “Life Cycle” is the most important element of maximizing the potential of your used car department.

Doesn’t it stand to reason that if you can shorten the Life Cycle of your used cars that you’re going to enjoy them a whole lot more and make more money? Dealers and used car managers are always looking for that magic bullet. We all know there is no magic bullet, but if there was one it would be called the bullet of “Life Cycle Management.”

When you shorten the life cycle you make more gross and sell more used cars.

Poor “Life Cycle” management impacts:

A. Slow Turn
B. Aging
C. Volume
D. Gross
E. Poor ROI
F. Attitudes
G. Ability to Trade at the Door
H. Future Acquisitions

There are many factors that create a slow turn and a long life cycle:

A. Acquisition to Write Up
B. Write Up To Shop
C. Shop & Parts Issues
D. Willingness to Re-Route (Sublet and/or jobber for parts)
E. Detail/Clean Up Issues-Same as “D”
F. Photos-Quality and Quantity
G. Posted on Internet
H. Pricing
I. Gross Attitudes
J. Pay Plans

If you focus on fixing “Life Cycle” factors then your coffee is always warm and your ice cream is always cold and the taste doesn’t get old. That’s all I’m gonna say. Tommy Gibbs

I continue to be baffled when I see dealers with what I would consider to be aged inventory. What is aged? What’s the cut off number? Some would say 45 days. Some would say 60 days. Some dealers are willing to accept 75 or even 90 days as an aged number.

The biggest problem I observe in this business is that people don’t want to be held accountable. They don’t want to take “the hit,” wholesale losses, at whatever they have determined to be an aged unit.

And then all of a sudden they start to expand their “aged zone” much like a struggling baseball player starts to expand their “strike zone.”

As a hitter expands their strike zone, they start to strike out more. That’s a great parallel to aging using cars. The further you are willing to extend the life cycle of the unit, the less money you’re making.

Never forget, taking a loss on a used car at the end of the aged period is not the goal. The goal is to find a retail buyer before you hit that number.

I believe that most of you know what I’m saying is true, but just in case you aren’t a believer I have a little experiment I’d like you to consider. It’s called 30/30.

I have a spreadsheet I want to send you. It’s an easy way to track used vehicles you sell within the first 30 days VS those you sell after 30 days. The odds are extremely good that the average gross on those you sell in the first 30 are going to be a lot better than those you sell after 30.

All you have to do is hit reply and put in the subject line 30/30. I must receive your request by Friday May 22 in order to include you in the email with the spreadsheet attachment.

I don’t want to see you expand your “aged zone.” I do want to see you expand your “thinking zone.” That’s all I’m gonna say, Tommy Gibbs

Achieving an above average front gross profit on used vehicles is a challenge that’s not going away anytime soon. There are a lot of factors that contribute to grosses going up or not.

One of the most overlooked factors is far too often many in the business have given up on asking for “it all.” I’m not suggesting you do it on every unit, every time, but on certain units you need to give it a shot once in a while.

Let me caution you, shooting the moon can be tricky. You have to be smart enough to know when to get the pricing back in line with the market. Is it 5 days, 10 days, or even 20 days? That’s where you have to pay attention and that’s where your experience and expertise comes into play.

If you shoot the moon once in a while you might just get lucky and hit it.

One thing is for sure, you’re never going to get to go to the moon if you don’t get on the rocket once in a while. But, you also have to know when to abort the mission. Go get ’em Captain Kirk, that’s all I’m gonna say, Tommy Gibbs