As most of us know, constipation can be a terrible thing. When you are constipated it’s virtually impossible to be as productive as you might otherwise be.

Exercise, drinking lots of water and in some really bad cases taking a strong laxative can often relieve the problem and get you back on your “A Game.”

Having 60-day-old plus units in stock is a lot like being constipated. You can never perform your best when you’re all stopped up.

60-day-old units will make you sluggish and hold back your potential to be as productive as you might be. Your “A game” will never show up when you have used car constipation. Think of it as Poop in the chute.

Dealers will often give their used car inventory a laxative, flush the system and start over. It’s a costly approach that’s never the best way to go.

The problem is that even when they “blow it all out” it doesn’t do that much good in the big picture because they don’t change their diet or exercise, so the inventory continues to be constipated and therefore hold them back from achieving their maximum potential.

A good diet for the used car department would be to have good solid processes. A good exercise program for the used car department would be to understand the role that speed plays toward good health. Good diet and exercise can help you avoid used car constipation.

Constipation makes you stinky. You don’t want to be stinky. Having aged units makes you stinky. You don’t want to be stinky.

It’s not a matter of fixing a one-time constipation issue.

It’s a matter of the right diet and exercise to live a happier and fuller life. If you give a hoot you’ll clean up your poop. That’s all I’m gonna say, Tommy Gibbs

And what might that be? Well, it would simply be an opinion on the subprime business.

Is it fair to say that in many cases a subprime customer actually pays more for the vehicle than a non-subprime or cash buyer?

I’m not talking about the additional high risk interest rate. I’m talking about the fees that get added back to the retail price of the car that go back to the lender’s bottom line.

Isn’t it illegal to charge more for the car when you finance it than when you don’t?

Dealers who do a decent amount of subprime constantly struggle with the pricing of their vehicles in order to cover the subprime fees. It’s not the dealer’s fault. The lenders are the ones that have set the rules for this game.

I’m not at all saying you shouldn’t be in the subprime business. But, it’s a really bad bet to hang your hat on the subprime business continuing as business as usual.

The Feds are coming. The Feds are coming. The Feds are coming. That’s all I’m gonna say, Tommy Gibbs

I heard a great quote recently and it goes like this, “You should go to work for a company that has high expectations.” I like that, I like that a lot.

So, let’s turn it around. You should hire people who you have high expectations of and you should reinforce your expectations on a daily basis.

As a leader in your organization you are responsible for helping to raise the expectations of yourself and those around you.

If you accept a sales person selling 6 cars a month I’m thinking you’re gonna get a lot of 6 car sales people. What you are willing to accept has now become the standard.

If you accept the used car department selling 75 cars a month then that’s what you’re gonna get.

You might be wishing for 100 but everyone in the store knows your real expectation is 75, so you hover around 72 to 77 and that’s it. Everyone goes away happy. Sorta.

There is a direct relationship between expectations and the way people are treated. If they are treated well, they generally will perform well. Part of treating people well is educating and coaching them well.

Why do the workers at Chick-fil-A perform better than those at Burger King? Because management treats them better. They go to work at Chick-fil-A knowing full well what the expectations are.

The same at the Ritz, the same at Apple, the same at Starbucks, the list goes on and on.

Management’s error is that it often takes the approach of, “It is what it is; we are a victim of the market, so let’s just do the best we can.” Never let doing the best you can be your rev limiter.
People will stretch themselves to achieve the level of expectations that have been set. Every leader should seek to create and build high expectations to improve the performance of everyone in an organization.

People will respond when challenged in a positive way and rewarded with positive reinforcement. Positive reinforcement includes training, praise, celebrating results and acknowledging individual and company successes.

It’s not enough to just raise your expectations and treat people well. You have to raise the level of education and coaching you give your staff in order to give them the tools they need to achieve the expectations you have placed on them. To do anything less is just plain stupid.

Don’t be stupid. That’s all I’m gonna say, Tommy Gibbs

You’ve made a choice and the odds are pretty good that you may not be happy with the choice you’ve made. You may have chosen to do volume or shoot for a high average gross profit.

Your struggle may be that you’re not generating enough total gross profit based upon your choice.

Let me remind you that the only thing that is really important is how much total gross you are generating. I always say, “You cannot spend average gross profit. You can only spend total gross profit.”

It’s a contradiction to say to your staff that you expect both high volume and high gross per unit. They stay confused and frustrated when you keep pounding them over the head with this misdirection and sleight of hand marching orders.

I’m sure somewhere out there someone is making it happen on both ends, but it is certainly the exception and not the rule. So, you need to get over it.

It’s a given that more than 80% of the people shopping for a used car shop the Internet. If you think you are going to post high prices or no prices out on the Internet and traffic is going to show up then you are dead wrong. The Internet is a “game changer” for all of you regardless of your new car franchise or set of circumstances.

You have to decide if you want to play the game. More importantly you have to decide if you want to win the game.

It’s a game. There are winners and losers. As Dr. Seuss said, “You have brains in your head. You have feet in your shoes. You can steer yourself in any direction you choose…”

Taking this leap into the volume world means rewriting your overall strategy from acquisition to staffing, pay plans, reconditioning, marketing, and pricing.

Failing to address any of these will result in frustration and poor production and you may find yourself worse off than you are right now.

The bottom line should be to increase your total gross profit. It’s not done by improving your average. It’s done by maintaining a respectable gross and substantially improving
your volume. Small market or big market, it doesn’t matter.

The Internet has opened the world up to you and you have to decide if you want to be in either that world or your own little world. Your little world has limitations.

The Internet world does not. That’s all I’m gonna say. Tommy Gibbs

If you’re going to continue to make money, and hopefully make even more money, you will have to become more efficient.

Your processes will need to become more efficient. Your management team will need to become more efficient. Your entire dealership will need to become more efficient.

You will have to become more efficient when it comes to managing your expenses. And, you must become more efficient when it comes to speed and cost of your reconditioning.

There are many issues dealers are scrambling to deal with as we move into the most competitive environment in the history of the automobile business.

In order to do volume in used cars you need to have a “costing advantage.” By “costing advantage,” I mean what’s added to the car once you own it, which includes packs and reconditioning.

To have a costing advantage you have to re-think your packs (which usually gets down to pay plans) and most important, what you charge the used car department from your shop.

If you know your history, you know that the reason dealers added packs and charged full retail from the service department to the used car department was because sales managers worked from cost up.

In the good old days sales managers had control over gross so you could nail them with all the high charges you wanted. They still got the average gross you needed and you could put the money from Parts, Service and Packs in your other pocket.

This is no longer true as your sales managers don’t have control over gross as they once did. That’s why dealers are more and more becoming one-price dealers and saying “no” when the customer shows up and wants a discount.

If you’ve already dropped your pants on the Internet with a price designed to get them to show up then you have nowhere else to go.

So, without saying they are a one-price dealer, many dealers are taking a tougher stand as well as changing sales people’s pay plans to match their new found pricing and marketing strategy.

I predict within due time more dealers will become more like CarMax and not pay sales people or managers on gross.

Remember, as we move more toward a once-price concept the skill and pay level of the “desk managers” will be much lower than in today’s market. There will be more effort made to sell the store and the product with less effort on “penciling the deal.”

One of the things that you need to continue to evaluate and work on is the amount of time it takes for you to get a car on the lot and ready to go.

Sadly, most dealers do not actually know how long it takes. And even when they do, they turn a blind eye toward the problem. They let the proverbial tail continue to wag the dog when it comes to fixing the service timeline problem.

The second thing that needs to be addressed is the reduction of recon expenses. According to CarMax’s annual report they reduced recon expenses by $250 per car last year. How’d you do?

If you’re going to do more volume you need to have an advantage when it comes to getting cars through your system and the cost tied to doing so. You must become more efficient.

The pain of efficiency, or the pain of regret. You’re going to have one or the other and the cool thing is you get to pick. That’s all I’m gonna say, Tommy Gibbs