I’m thinking about half my readers know what a “wash out sheet” is and the other half probably don’t. For those that don’t, in the early years of the retail auto business, dealers used a “wash out sheet” to determine how much money they really made on the sale of a vehicle.

Here’s the way it worked. A new car comes into your inventory. You don’t know how much money you made until any and all trades are sold and thus “washed out.”

Follow the sequence. A new car creates a trade; you sell the trade. You trade in another and finally sell the last one with no trade. You then you calculate the total gross generated by the sale of that one new car plus all the trades.

It this case it took 3 transactions to determine how much total money was made. You would do the same thing if you purchased a used vehicle. If there were no trades or maybe one, the wash out occurs much sooner.

Some dealerships didn’t pay the sales person his/her full commission until the deal “washed out.” Do you think the sales person had a vested interest in seeing that the trades got sold? You betcha!

As I see the industry struggling with gross profit I have to wonder if maybe we’d be better off to go back to the old way of thinking. With technology being as sophisticated as it is today, why not calculate the total gross generated by one new car sale or one purchased used car sale?

We can all agree that to improve front gross profit, we need to work harder to sell the value of the vehicle and our organization. Most would also agree the key to long term success is going to be to improve volume.

If you’re going to improve volume it might be wise to look at the big picture by thinking about how much total “wash out gross” we are generating rather than just the sale of one unit.

It’s kind of like suits and ties. Keep them around long enough and they will come back in style. That’s all I’m gonna say, Tommy Gibbs

My parents and grandparents lived through the Great Depression. Their lives and the way they think about money and how they spend it was dramatically changed forever.

In the last 10 years or so many dealers went through their own great depression. No doubt, many learned some very valuable lessons.

It’s funny how a few good years in the car business can make one forget life’s valuable teaching moments. I get to see a lot from where I sit, and what I’m seeing is dealers feeling a great deal of temptation right now.

You might fit one of these two categories:

1. You’ve done a good job of selling down for the winter season. Inventory is short and you’re worried that you may not be able to keep pace with your current growth. You want to go out and buy a bunch of inventory so you can be ready.

Tommy Says: Oh stop it. You’re in the catbird’s seat. Take a look at what you sold last January, February and March. I’ll bet you if you turn your current inventory, add a little here and there that you can exceed what you did last year. You’re poised to have the best spring and summer in your entire career. You’ve gotten smarter this past year. Don’t be stupid and let the Devil turn you into a dummy.

2. You’ve got lots of inventory on hand. Lots of aged inventory, that is. The Devil is telling you to push the panic button, unload them at the auctions and start over. Prices are dropping and you are tempted to go buy some new stuff and be ready for the New Year.

Tommy Says: Oh stop it. You cannot win by dumping all that aged crap at the auction. If you’re going to do anything you’d be better off writing them down, finding retail buyers and getting yourself in position to have a big spring and summer. Now is the time to fix your mess. You’re not going to fix it by letting the temptation of unloading your crummy aged inventory in the wholesale market and loading up on more inventory.

The light you think you’re seeing at the end of that tunnel is a locomotive being driven by the “Devil of Temptation.” That’s all I’m gonna say. Tommy Gibbs

There are a lot of common problems when it comes to the used car operations for new car dealers. But of all the problems and challenges that dealers face, the number one problem is that dealers trade or buy a unit and have a lack of “intent.”

Most would say “Of course I have intent. I intend to sell this unit and make some money.” That makes total sense, but the problem is it’s far too general.

That’s like saying you’re going to drive from NY to LA without a plan on how you intend to get there. How many of you have ever heard the saying, “Every used car has to stand on its own?” If you’ve been around long enough you understand the term and can probably agree with the statement.

That being true, how can you give them all the same shelf life? How can you not have a specific intent for each unit? Most dealers don’t think “What’s my intent” when a unit comes into their inventory. It makes no sense to paint them all with the same broad brush.

Intent starts with the appraisal and is finalized during the trade walk where the “final intent” is determined. If dealership managers would look at each unit and clearly state their intent they would have fewer inventory problems, turn would improve, and average gross, volume and ROI would go up.

I’m not going to go into the details here in this newsletter, but my life cycle management process gives you the disciplines to determine and carry out your “intent.” I will be making my life cycle app available to a limited number of dealers in early 2015.

My intent with this article is not to try to sell you something. My intent is to get you to think harder about what your own intent happens to be when you bring units into your inventory.

That’s all I’m gonna say, Tommy Gibbs

If you read Automotive News and other related publications then you know the value of used cars has started to head south. 

For some of you it’s no laughing matter. And for some of you, you’re sitting there with a smile on your face. You might even be using the secret code LOL.

Those that are smiling are smiling because they have the disciplines in place to make sure units don’t go over 60 days. Others are frowning because they have a lot of stuff sitting out on the used car lot way over 60 days.

They know they have a ton of water and with values dropping the water is moving up to flood levels. Might be panic time.

It’s very, very simple. If you are turning your inventory then you don’t really care what happens in the market. That’s because you’re always buying and selling in the same market.

Think about it; if you have units in stock that are aged, then you are not in today’s market. There are other dealers bringing those same units in the inventory today, for less money than you have in yours.

And, they can sell them for less and make more money than you can.

Kinda funny ain’t it? That’s all I’m gonna say, Tommy Gibbs