A number of months ago, I wrote an article comparing constipation to aged inventory, or to be more clear, those units over 60 days old.

When you’re constipated, it’s virtually impossible to be as productive as you might otherwise be. Having units over 60 days is the same as being constipated.

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.” You can never perform your best when you’re all stopped up.

Until you get the water out of your used car inventory you will never be but so good. You will have a few good months, but unless you commit to a good diet of solid processes you will always struggle.

One of the best ways to fix the problem is to reappraise the entire inventory, extract the water, give each unit a new birthday and put in my “Life Cycle Management Process.”

As long as you have aged units aging, then you’re going to have a lot of water. When you have lots of water, the more the sales people will walk around the aged units.

They don’t want to sell a unit they can’t make any money on. Believe it or not, the managers don’t want to sell them either. They would much rather sell something that they can make some gross on. This isn’t rocket science.

Here’s the tip of the day. If you ever decide to write your inventory down, you have to change your overall strategy of how you’re going to manage your used car department moving forward. It does little or no good to write down your inventory and go back to your stinky old ways.

Constipation is fixable. Aged inventory is fixable. When you fix it, you feel better. When you feel better, you make more money. That’s all I’m gonna say, Tommy Gibbs

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

If you have children and if one of your children was sick, I’ll bet you would keep a close eye on that child until they recovered from their sickness. Is that true or false?

I’m appalled at how many used car managers don’t actually know where their sickest children (oldest old used cars) are.

Often when I’m reviewing inventory with a used car manager I’ll ask them to tell me about certain cars in their inventory.

On some of the cars I’ll ask them, “Where is it?” They will say “It’s in the inventory.” No, I’ll say, “Where is it? Where is it parked?” Typical comments are, “I’m not sure”, “I think it’s out back”, “I think it’s in the service department”, “I think it’s in clean up”, “I think someone is driving it”, “I think it’s sold.”

You’re not being paid to think. You’re being paid to know. The great used car managers know where every car is every moment of its life with their store.

The great used car managers know where all their children are, especially their sickest ones, regardless if they have a 40 car inventory or a 400 car inventory.

They just know. You wanna know why they know?

They know because they care. They know because they are great parents. They know because the more they know about where their children are, the more they can protect them.

They can protect them from the evils of the world such as becoming aged, poor ROI, and slow turn. Let the parenting begin. That’s all I’m gonna say, Tommy Gibbs

It scares me when a dealer hires a buyer. It’s always done with good intentions, but more often than not it doesn’t have a happy ending. The buyer I’m talking about is the one the dealer is putting on the road to go off to wonderland to buy cars. Months down the road the dealer is stuck with a lot of aged units and wonders what happened?

It scares me when a dealer makes a wholesale profit. There are rare sets of circumstances when it can be done. Maybe the dealer cut his/her teeth in the wholesale business or maybe they run an in-house auction for the junker units. But other than that, there aren’t many legitimate reasons for making a wholesale profit.

It scares me when a dealer tells me “We never miss a trade.” I understand the intent. It’s the right thinking no doubt, but never think for a minute that you don’t miss trades. Everybody misses trades. I’m thinking if you’re making that wholesale profit you might be missing more trades than you think.

It scares me when a dealer hires a new used car manager and turns ’em loose. They come on board with great stories of how much they have accomplished at their previous stores. (Notice, stores is plural.) So, the dealer says, “Go get ’em.” What should happen is the dealer or GM becomes Siamese twins with the new used car manager for next 90 days. Every minute that the dealer can spare should be spent with this used car manager listening, teaching, learning, coaching and sorting out fact from fiction.

It scares me when a dealer doesn’t know what their oldest used car in stock is. Better yet, the used car manager doesn’t know. To add insult to injury no one knows where it’s parked. These are your sickest children. How can you not know?

It scares me when a dealer tells me they get units through service and recon in 3 days. There are some that do. Most don’t and most don’t really know. The best and worst answer is the same. “I don’t know.”

It scares me when a dealer has a belief that it’s ok to keep used vehicles for 75 or 90 days. I might understand it if we wre living in the 1970s. Back then maybe we just didn’t know any better. How can you not know better in today’s information society? How can you not understand the fact that you don’t make money when vehicles sit that long? How can you not know you’re working with a depreciating asset?

I’ll tell you what I know. A lot of things scare me. That’s all I’m gonna say. Tommy Gibbs

I realize this may not be a fit for some of you. And yes, there are some who believe this is old school, old fashioned and

outdated. But, there are some who can make this work. And if it helps someone sell a few more units, I can handle a little criticism.

Memorial Day is about 30 days away, and it’s not too soon to be thinking about putting on a Memorial Day sale.

Consider Having An Onsite Tent Sale:

1. Put the tent up as close to the road as possible. Pick the best strategic position on your lot.
2. Put tables and chairs in the tent.
3. Put ALL of your people in the tent.
4. Everybody goes in the TENT!
5. Work all deals in the TENT!
6. If at all possible, move your computers into the tent and do F&I in the TENT.
7. Hang banners from the TENT saying “TENT SALE.”
8. Promote it with Direct mail and/or with a “private invitation” only deal for Thursday before you kick off your regular ads.
9. Do anything you can to make it look like a circus.
10. Rent those jumping air things for kids.
11. Balloons and more balloons.
12. Pop Corn, Sodas, Hot Dogs.
13. Lots and lots of spiffs for your sales people and managers.
14. Do a great kick off breakfast on Thursday for your staff.
15. Don’t do it just for the sales staff; get as many of your employees involved as you can. (Feed everybody lunch every day of the event as well.)
16. Send out memos and emails to all employees explaining in detail what’s going to be happening.
17. Rope off special parking for customers. Hire an off duty police officer or security guard to direct them.
18. Answer the phone XYZ Dealership Tent Sale in Progress.
19. Do a fundraiser at the same time for the local little league or whatever.
20. Post the event on your website.
21. Do an email blast to all your customers advising them of the sale. If your CRM system is sophisticated enough make sure you tell them you need their specific trade and will pay top dollar for it during the sale.
22. Giveaways generally don’t do much except cause people to show up to get their gift and leave, but having people register for a free car is a good way to get info on them when they show up. Pick out a $1000 or $2000 car and give it away.
23. Along that same line, give the salesman who registers the winning ticket some sort of prize. Gift card, $200, whatever floats your boat.
24. Make up a bunch of signs like real estate signs that say “Tent Sale in Progress” and put along the grass in front of the dealership.
25. If you’re close to the interstate do some signs with arrows and put them up close to the ramp. (Oh come on, the worst that can happen is they make you take them down.)
26. Rent a chicken suit or some kind of character and have them walk up and down in front of the Dealership with a placard that says “Tent Sale in Progress.”

It’s not complicated and it’s not expensive. You just have to be creative. Get some of your key people together and throw some ideas around.

That’s all I’m gonna say, Tommy Gibbs

It’s been a tough winter for some of you. Spring is finally here. Trees, flowers and your excitement about the “selling season” are starting to bloom.

If things are going to bloom, or better yet boom, for you, then it might be a good time to put the RE into effect:

1. RE-evaluate-Take a minute and go walk your lot. Take the blinders off. First thing you have to ask yourself is “Does it look like Nordstrom?” Ok, maybe it’s not going to look like Nordstrom, but does it look like Walmart after a big sale? You know, everything is just thrown everywhere. Let’s do a little checklist:

Are the vehicles in straight lines? (Used Car 101)
When was the last time the entire lot was rotated?
Are you using angles to display your inventory?
If you are using license plates, do they all have one or do some have them on the front, some on the rear and some not at all?
Do they all have your decal on the rear of the vehicles?
Do you have fresh FTC stickers on each vehicle?
Do you have fresh window stickers on each vehicle?
If you have other decals or markings on the windshields, do they all have same or similar markings?
Do they all have pricing hang tags? Are some lying on the floor?
Do they all have at least a quarter of a tank of gas in them?
Are they nasty, dirty on the outside?
When the public rides by or pulls onto your lot can they easily identify where the used cars are?

2. RE-focus-To be successful in the used car business you have to be well focused on it and be totally committed. Your entire management team has to understand your commitment to the used car business. This doesn’t happen through osmosis and a meeting every six months. When I say entire management team I mean just that. All Sales, F&I Management, Service Management, Parts Management, Body Shop Management and the Controller. Little Johnny, the lot attendant, needs to be a part of this as well. For the next 60 days, meet with these key staff members twice a week to discuss where you are and where you’re going. Tuesdays and Fridays are best. Make sure on Fridays that they are all included in a lot walk. Do not miss a used car on this lot walk. Every car in your inventory must be touched. If it’s in service, touch it. If it’s in prep, touch it. If it’s in the budget center, touch it. Everybody touches it. You will come across issues you never knew were there and better yet you will solve them immediately. (Don’t let anyone miss these walks.) Make sure a part of that conversation includes everyone knowing how much money you have tied up in used cars and how many of those dollars are over 60 days. Yes, they need to know the dollars, not just the number of units. Make sure they also know what percentage is dead money over 60 days. Example: You have $1,000,000 in used. $600,000 is over 60 days. Make sure they understand that 60% of your money is dead and eroding fast.

3. RE-Recon-Take every unit over 30 days old back through a recon process. (You’ve already missed your best window of opportunity to make gross; that would be the first 20 days.) Most of them should not need mechanical work done, but if they do, get it handled. Most importantly, put a full clean up back on them. Whatever you have to spend, it’s going to be worth it.

4. RE-Invest-in yourself and your management team. Do something to gain some knowledge. Hire me, visit CarMax, or visit a dealer friend in another state that does a good job in used. Attend a workshop. Join a Twenty Group. Join a Used Car Twenty Group. Do something besides sitting there and waiting for something to happen. You may think you already know all there is to know about the used car business and you will just be wasting your money. The fact is maybe you actually know a lot, but you need something to jar your brain and get it going again. You have become real good at talking the talk, but you may not be walking the walk.

5. RE-think- your management team. Do you really have the right person running your used car operation? Yes, that person may have been with you for years. Loyalty sometimes equals mediocrity. Maybe they have some great skills, but the fact may be that you are not making the best use of their talents. Used car managers today have to be “Asset Managers.” It is not a matter of just being a “Car Guy.” They have to have a good blend of common sense and ability to make use of technology. In my travels, about 75% of the dealers have the wrong person managing their used car operation and they wonder why they are not maximizing their full potential? (Even if you have the right person, they have to have the right tools, processes and your full support to be successful.)

Yep, it’s all about the “RE.” I’m RE-minding you about all the stuff you need to be paying attention to. That’s all I’m gonna say, Tommy Gibbs