There’s a lot of talk these days about the “Velocity Method” of selling used cars and trucks.

There are some that would define Velocity as: “A method of giving your cars away so as to impact your gross to a point of a substandard amount that will make you want to throw up your hands, beat yourself over the head, and barf.”

My definition for the word Velocity: the whipping boy of the auto industry that can be blamed when we use software pricing tools as the Bible, don’t use our brains and don’t use the tool as it was intended in the first place. Software is a tool. It’s not a genie in a bottle.

I’ve come to believe that the disconnect with the Velocity method of selling vehicles is the thinking that you have to give everything away. That’s just not true.

While I’m a big fan of pricing your vehicles “to the market,” I also believe that you have to be willing to shoot the moon on certain units for some period of time. Maybe it’s 15 days or maybe it’s 20. You know your inventory, you get to pick.

The problem is you often miss the chance to take a shot at making some big grosses because your vehicles are hung up in recon for the first 10 days of their life-cycle. You make your best grosses in the first 10 days or so. It’s as true today as it was 25 years ago.

It can often be painful when you’re trying to move to the “Velocity Method” because you already have a bunch of stuff over 60. The grosses on those units aren’t going to be pretty. And now you’re trying to speed up things on the fresh pieces and the picture gets double ugly.

If you’re trying to get things sorted out, there’s going to be some serious pain to endure. Sort of like getting a bad tooth pulled. It’s not going to get any better until you deal with it.

As you move forward, think about the choices you have:

1. Hold a high gross profit per unit.
2. Improve your volume with lower grosses.
3. Improve your volume and be smarter about gross.

In today’s market, your best chance is going to be #3. The longer you wait to adapt, the more pain that tooth is going to give you. That’s all I’m gonna say, Tommy Gibbs

There’s an old adage that you make your money on a used vehicle when you buy it. It’s a true statement to a point. It certainly stands to reason that if you pay too much, you don’t have a chance. When you buy it right you’re half-way home!

There are times when having a mindset of “buying right” costs you a deal. It happens more frequently at the front door than the auction block. You always over-pay at the auction block, but you try to steal them at the front door.

Stealing a unit once in a while is ok, but if you have a mindset of stealing at the front door in order to “buy right,” you may not be as smart as you think.

One of the best strategies you can put into play is to keep an eye on your look-to-book and press the percentage up. If you’re going to over-pay, over-pay at the front door. At least you sold a unit by doing so.

I’m going to challenge the statement that “You make the money when you buy a unit.”

The reality is you make the real money when you sell the unit. Your ability to market and sell a unit faster is what makes you the most money. If you own it right and it takes too long to get it to the front line, and you fail to price it right soon enough, then you blew the whole “owning it right” concept.

Just because you’re half way home doesn’t mean you’re there yet. You won’t make any money until you’re smart enough to find a retail buyer.

Be smart. Understand when you make the money. That’s all I’m gonna say, Tommy Gibbs

If I get asked this question once a week, I get asked this question 100 times a week. It’s generally phrased as, “We can’t find inventory, do you have any suggestions?”

These are smart, intelligent dealers and managers asking the question. These are people who are true “car guys and gals.” They are not new to the game and they know what end is up, yet they still ask the question.

They know the answer. But they hold out for a miracle that I have a secret tunnel that I can connect them to that has some gold at the end.

To quote my good friend and mentor Dale Pollak:

“The reality is that there are plenty of cars available in the
wholesale market, but the margin opportunity for most is very, very small.”

So there you have it. Dale has spoken and I shall interpret. There’s inventory out there, but you can’t or won’t pay the price.

You won’t pay the price because:

You haven’t accepted the fact that units you purchase aren’t going to have much of a profit margin.

You haven’t accepted the fact that you will need to turn and burn those units.

You haven’t accepted the fact that total gross is more important acceptedverage gross.

You haven’t accept the fact that packs and high recon costs are adding to your woes of paying the price.

You haven’t accepted the fact that paying on gross profit further complicates the retail selling process.

You haven’t accepted the fact that you need to create a greater awareness on look-to-book.

You haven’t accepted the fact that mining your customer base for potential sellers is worth more than a 60-day trial run.

You haven’t accepted the fact that the number one issue of low grosses is you sell too many units late in the life-cycle.

You haven’t accepted the fact that many good things come to the table when you find a retail buyer at some number.

These are just a few of the things you haven’t accepted, that are causing you not to be able to find the inventory you need.

It’s important to know where to buy cars. It’s even more important to know why you aren’t. That’s all I’m gonna say, Tommy Gibbs

“Some people will not change until the pain is so great that they have to.”

One of the more interesting things I see in my line of work is dealers and managers often know they have a problem, but don’t do what’s necessary to fix it. These are smart people with years of experience and plenty of data and information to conclude that something isn’t working as well as it should or could.

They know there’s a better way, but stay on a road named “frustration.” When your staff becomes frustrated, the growth of your organization is stymied, and your bottom line impacted.

The two examples I see most often are:

1. The relationship between the parts and service departments and the used car department. Sometimes it’s the cost of parts and repairs and sometimes it’s workflow.

Never forget that you can’t sell them and make the most money if you can’t get them to the front line in a timely manner. Nothing drives sales management crazier than seeing units sitting out back waiting to go through recon.

A large percentage of the dealers don’t know where the bottleneck is or how long it takes to get units through the system and ready for retail. They know they have a problem, they just don’t know how big it is and how much it’s hurting their bottom line.

Each department is a separate business and there’s pressure on each department/business to make a profit. Therefore, it often feels like our business model, by design, is set up for the departments to work against each other.

2. Overaged used cars. Dealers know it’s not profitable to keep used cars past 60 days. Most know the profit starts to take a serious dip on day 30. Profit and ROI are going south, and the dealer looks the other way. How such intelligent people allow this to go on and on is extremely hard to understand.

Ignoring the problem creates a culture that lacks discipline, which over the course of time will vibrate throughout the store. You cannot win on a consistent basis when there’s a breakdown of discipline.

More often than not we know how to fix the problem. And, more often than not we don’t fix it. We don’t address the problem due to fear. Fear can be real or imaginary. We often fear that if we attack the problem that someone will quit because they can’t live with the new approach.

If you fear asking people to change to something that’s going to make you, them and your organization better, then there may be an even bigger problem that needs fixing. Maybe you need to fix your thinking.

That’s all I’m gonna say, Tommy Gibbs

As we all know, there are as many pay plans as there are dealerships. If you’ve ever heard me speak, you know I’m not a big fan of having buyers out on the streets running around buying cars and trucks.

My evidence is most of the time the units that end up aging on you are those that you purchased from the auctions by your buyers or those units brought to you by “Bubba,” the wholesaler. Those are always your biggest wholesale losses.

The odds of you being successful with these purchase units would go way up if you used my lifecycle management process. But, that’s not the subject of today’s article.

The subject today is that if you’re going to have outside buyers, what’s the best way to pay them?

Most outside buyers are paid based on so much per unit purchased. If you are of that mindset, here’s my suggestion:

The buyer only gets paid when you retail it at a profit or breakeven. They get nothing for buying the unit. They only get paid when you retail the unit.

Trust me, here’s what’s going to happen:

A. At first, your buyer isn’t going to like the new plan. To make it a little easier to swallow, up the ante on what you’re now paying your buyer. If you’re paying $200 a unit, make it $300.

B. Your buyer is going to take an even more serious interest in every unit that’s on the lot that’s in his/her inventory.

If it’s tied up in service, your buyer is going to be pushing it through.

If it’s dirty, they are going to be getting out the washrags.

If it doesn’t have fuel, they are going to get fuel in it.

If its photos are lousy, they are going to start taking pictures.

If the pricing isn’t getting changed, they are going to be having a conversation with the price changing person.

I would further suggest that you add the fee to the cost of each unit that’s purchased. Thus when you retail it and pay your buyer, you’ve already expensed your acquisition cost.

You can apply this concept to a company employee/buyer or a true outside buyer.

If you’re gonna have a buyer, turn them into a retail buyer. That’s all I’m gonna say, Tommy Gibbs

Here’s the headline and first sentence from Automotive News published on July 2, 2018:

“Tariff tornado: Prepare for impact”

“A 25 percent tariff on imported vehicles could chill new-car sales, devastate dealership profits and trigger job losses at stores, dealers and their advocates say.”

Let’s assume that this is true. Let’s assume that tariffs of any type have the potential to hurt the automobile business.

Isn’t a pack a self-imposed tax? Aren’t you adding a cost to your unit that does nothing for the unit?

It doesn’t make it prettier.
It does make it run better.
It doesn’t add one lick of value.
It doesn’t help you sell the unit.

I fully understand all the “whys” of adding packs. They have served us well over the years prior to the advent of the Internet, and prior to dealers using pricing tools to market their inventories online.

Every day that goes by, you’re moving more and more toward becoming a one-price dealer whether you want to or not. And, whether you like it or not, you’re moving closer and closer to not paying sales people on gross profit.

Paying sales people on gross profit doesn’t make a lot of sense when management has already set the price online and there’s less and less negotiation going on.

If either or all of those statements are true for you, then please tell me how taxing yourself makes good business sense?

If you find a shred of truth in what the media has been reporting, then you must agree to the following: tariffs have the potential to hurt sales because of the added cost to items.

That being true, then how can you deny that your “Pack Tariff” isn’t hurting you when it comes to buying and selling used cars?

Let’s assume that you’re in a state that has a sales or titling tax. And, let’s assume the state drops the sales tax for all dealers except you. Would you be at a disadvantage? Of course you would.

So why do you want to keep putting yourself at a disadvantage by having a “Pack Tariff?”

Think how much you can help morale and help your sales if you could do away with taxes. Stop taxing yourself. That’s all I’m gonna say, Tommy Gibbs

Can you believe it? The year is half over. Time really does fly, doesn’t it?

How was your June? How have your first six months been? It’s July. Half the year is gone. Kinda scary isn’t it?

Some of you have had a great first half. Some of you, not so much.

Some of you have been running full speed ahead. Some of you have been dragging through the sand.

Something has been holding you back. There may be some legitimate excuses, but maybe you just had the wrong plan in place. Just because you had the wrong plan does not mean it’s too late to fix it. You’ve still got 6 more months to go.

Those of you who have had a good first 6 months need to be cautious of becoming complacent. Even though things have been going well, you would be very smart to review how you can make things better as you tackle the second half.

Everything we do is about choices. You can choose to let things be as they are or you can choose to dial it up a notch or two.
To do so means to review your plan and the strategies you have in place. And, make the changes that are necessary to get you where you know you need to go.

Your other choice is to do nothing. Go sit in your office and stare at the wall. Enjoy your seat and pretty soon it will be over, Tommy Gibbs

We’re currently in the soft launch stage of my UpYourGross software. I’m not writing this today to sell you on using the software, but I want to share a couple of things I continue to observe with our early users and the current data.

It is stunningly remarkable the difference in grosses on:
Trade-ins
Auction Purchases
Rental Car Purchases
Customer Acquisitions

Our top performing dealers realized they must turn the auction purchases faster with less gross. Same thing for rental units. They understand that by and large they can go back and buy some more. Turning these units faster at some gross is far better than sitting on them thinking you’re going to achieve the same type of gross that you will on a nice trade-in.

It is further stunning to me to see that there are dealers sitting on units that are over 60 days old and trying to make a profit. The root of that mindset is that every once in a while a miracle will happen and they actually make some money on an aged unit. God bless you if you can do that, but it’s a safe bet that the ROI is going in the tank even if the miracle happens.

It would be very wise for you to pay attention to the grosses you are trying to achieve on the various sources of your inventory and to take a look at your pricing on units that are starting to age out on you. That’s all I’m gonna say,

Absolutes are a powerful tool toward creating a disciplined organization.

The downside of absolutes is it chokes off the potential to have an acceptable exception.

Exceptions break the rule of discipline.

Exceptions soon become the norm.

When exceptions become the norm chaos breaks out. The type of chaos I’m referencing isn’t actually like a bomb going off. This chaos is slow and gradual, often not recognized, and then – whamo – there it is, its ugly face screaming at you, “What the heck happened?”

Now here’s the real deal for those of you looking to become

better leaders. You can have absolutes and exceptions in the same house. They can actually hang out with each other once in a blue moon.

True leaders can use them both and chaos will never show its ugly face. Granting an exception and going back to absolutes is very doable.

The problem with leadership is that very few leaders have the skill to make effective use of them both.

Most people in leadership positions are stuck with one or the other.

At any given moment one is just as bad as the other. That’s all I’m gonna say, Tommy Gibbs