The longer I’m in this business the more I scratch my head when I come across dealers that allow their managers to keep units past 60 days. I’m not talking about one or two here and there. I’m talking about a consistent pattern of multiple aged units.

There’s no way that they don’t know that it doesn’t work.

So, why do they do it? The only thing I can figure is they just don’t have a commitment to having a disciplined organization and/or they don’t understand the math.

I’m not going to bore you with the whole ROI calculation story, but want I do want to point out to you is by and large you don’t make much money on anything you have that’s over 30 days old.

So, how do you think you’re making money on all that stuff you keep past 60 days? Have you ever thought about tracking it?

Maybe they just don’t know how to say no, when a manager asked if they can keep it a little longer.

Here’s the best tip I’m ever going to give you. The next time a manager asks if they can keep it a while longer, hold up your hand, palm facing away and say “Just talk to the hand.” That’s all I’m gonna say, Tommy Gibbs

1. Study The Data- Be a student of the game. Use Auto Count’s Reports each month to confirm what’s selling and what’s not. Use vAuto’s stocking tool to determine the fastest moving units to stock. Combine those reports with Auto Trader’s reports and you will have a competitive edge. The more units you step up on the more cars you sell at retail.

2. Press Your Cost Down-This is probably the simplest and most effective thing you can do to improve your business. Know what your average cost per unit is every day and do what you can to reduce it. There is no magical number. It’s about keeping the less expensive units and making sure the more expensive ones turn fast.

3. Know Your ROI-Every deal should be tracked for ROI. As you are working a deal you not only need to know how much gross you have, but what the ROI is. Go to FixROI.com and plug in three numbers. Shoot for 110 to 120% ROI. By knowing your ROI you will know what’s working and what’s not.

4. Attack the 10 Most Expensive Units in Stock-Make a list each day of your 10 most expensive units in stock. With one exception make sure they are priced really, really right. The one exception is if you know you always make money on a unit that’s on the list then use some common sense, don’t give it away. Consider putting bonus money on those 10 units regardless of the number of days they have been in stock.

5. Life Cycle Management- There is nothing, absolutely nothing you can do that will improve all aspects of your used car business more than understanding my process of “Life Cycle Management.” Think Fast, Be Fast-You are working with a depreciating asset. Pull the trigger quickly on units that you are suspicious about. Don’t hang on to them hoping and wishing something good is going to happen. Early losses are far better than late losses. If you are paying attention and recognizing problem units early in the life cycle then you will have a lot less need to lose money on them at 45 or 60 days. Knowing how to use EWR (Early Warning Radar) pays big dividends.

That’s enough for now. That’s all I’m gonna say, Tommy Gibbs

Several times a week someone will ask me, “What should the percentage of wholesale units be relative to the number of used cars retailed?”

While there may be some statistical data with 20 groups telling what dealers are averaging as a percentage, that doesn’t mean that there’s an acceptable number to be shooting for.

My answer to the question is, “There is no number.” Having said that, if you’re the Dealer or General Manager it’s a number you should always keep your eye on.

I’m a bit old school, but as a dealer I looked at every retail deal and every wholesale deal once it had billed and booked. My initials went on every deal.

I would often pick the phone up and say to the used car manager, “Tell me about this unit you lost $500 on” or “Tell me about this unit you wholesaled and made $300 on.”

I wanted to plant the seed in the used car manager’s mind that I was always looking at these units that were being wholesaled. What I was trying to do was create a little element of doubt as to whether we could have retailed this unit.

I know that there may be some dealers who may not agree with this statement, but I truly believe you should retail everything that has a breath of life left in it. Why should you let someone else gain a customer and make the money?

Sure, you will have some issues. But the pluses far outweigh the minuses to wholesaling a lot of units. We are in the retail automobile business and we should retail everything we can.

Don’t worry about the percentage. Worry about retailing more units. That’s all I’m gonna say, Tommy Gibbs

One of my favorite things to do when working with dealers is to discuss their oldest used vehicles in stock. If the oldest unit is 55 days old or 155 days old, 99.9% of the time they all have a storyline tied to them.

The conversation will often evolve to where the used car manager will say “We have it priced #1 in the market, it’s a nice car and I don’t know why it hasn’t sold.”

Some of you won’t like my response. But, my response is based on reality. And the reality is, if it’s priced #1 in the market and it still hasn’t sold…it’s not cheap enough.

We’re not talking about a fresh piece. We’re talking about your oldest unit in stock. And, it may have a flaw you failed to identify soon enough.

You’ve had it way too long. It’s time to make it “cheap enough” and make it go away.

That’s all I’m gonna say, Tommy Gibbs

Business has been pretty good hasn’t it? If you have access to the financial statement take a peek at your net profit to sales percentage. Are you in the 4 to 6% range? If you’re only in the 2% range, you could be in trouble when business starts to go south.

Historically in this business dealers make the most money when they are coming off of tough times. That’s easy to understand. When things get tough dealers tighten up on expenses and get back to basics.

Thus when the worm starts to turn, dealers rock the bottom line for a short period of time. But as we all know, the better business gets the sloppier we get.

It’s been very good for a number of years now. So, where are you? Are you letting things get out of hand? Are you making money in spite of yourself?
Is it the market or is it you that’s making it happen?

Ask these questions of yourself:

1. Have you dissected every expense on the expense page?
2. Do you have too many people in the wrong places and not enough in the right places?
3. Is your selling system the selling system you think
you have?
4. Are you evaluating every trade that you don’t make?
5. Are you holding a daily “save-a-deal meeting?”
6. Are you doing a trade walk?
7. Are you utilizing my “life cycle management process?”
8. Are you evaluating all the wholesale pieces to see if they have life in them?
9. Do you have a photo booth and is your website the best it can be?
10. Have you shopped your own dealership? Have you shopped CarMax?
11. Do you hold your staff accountable?
12. Can you shorten your selling process?
13. Are you using vAuto to buy and price your units correctly?
14. Do you have the right staff that’s getting daily coaching & training?
15. Are you still doing business the same way you did 10 years ago?
16. What’s the turnaround time for a used car from the time you own it until the time it’s ready for the line?
17. Are you leading the way or are you talking the way?
18. Are you mining your customer base for nice used cars?
19. Are you relying on packs to save your gross profit?
20. Are your pay plans old, outdated and not in tune with today’s market?
21. Is your volume and gross going up or down?
22. How many turns a year are you getting with your used inventory?
23. Are you tracking ROI/GAP?
24. Are you forecasting or “hopecasting?”
25. When was the last time you let Tommy Gibbs help coach you?

These are great questions you should be asking yourself. That’s all I’m gonna say, Tommy Gibbs

Did you know that for the year 2015 you need to focus on year models 2012, 2011 and 2013s in that order?

I’ve studied this and researched it for years. Unless there is something strange and unusual about your market here’s the way it has been going back to 2002.

If you get a chance to appraise a car that happens to be any of these year models you need to think long and hard before you try to steal it. These units are going to turn more or less regardless of the make or model.

Of course you’re still going to use your vAuto appraisal tool, but these units generally fit a price point that more buyers can afford.

I would suggest you further research this by using the Experian tool called Auto Count USA. It will give you the top selling models for your market.

Use this SHEET to list them and keep a focus on the year models listed at the top of the page.

I’m often telling you things you already know, because I know how easy it is to lose focus.

Stay focused on these units and you will make more deals and sell more units. That’s all I’m gonna focus on for today, Tommy Gibbs

One of the things I’m constantly encouraging my readers and clients to understand is that keeping units past 60 days is a really, really bad business plan. It borders on insanity.

If you still have 60-day-old-plus units, and/or you’re not a believer yet, I want to give you another way to frame it.

If you had $1,000,000 in the bank and each month the bank took $100,000 of your money and said “Thank you, goodbye, and have a nice day,” how long would you keep your money in the bank?

Well, well, well—hello 60-day-old units.

If you have $1,000,000 tied up in used cars, and $400,000 of it is over 60 days old, (I see numbers like this all the time) you’re losing a minimum of $40,000 month, give or take. If you want to debate the 10% idea then say goodbye to 5% and ring up a loss of $20,000.

One thing is for sure, you no longer have the $400,000 you thought you had. You do on paper, but you don’t in reality.

I have a lot of dealers who send me their GAP/ROI spreadsheet to review each month. (If you don’t know what it is, then you should find out.)

What is so shocking is when you sort the columns by days in stock or gross profit, more often than not, there isn’t any money being made after 30 days. Yep, 30 days. You don’t have to take my word for it. Just start tracking your mess and you will see.

We are all good sales people. Good sales people like to be sold. Often, someone is selling you on the idea it’s ok to keep ’em past 60 days. And even sadder, you might be selling yourself that it’s ok to do so.

A very smart man once told me that there are three places you should never put your money; in the bank, in the bank, in the bank.

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

As I write this I’m headed to the NADA convention. Are you going? If not, maybe you should be.

If you’re not going, I’m wondering why? Why would you not go? Don’t have time? Don’t want to spend the money? Don’t want to leave the store? None of those are very good excuses.

Now is the time to open your mind and shoot some WD 40 into your brain to loosen things up a bit. It’s winter, it’s cold and if you’re not careful your brain will freeze up and not thaw until sometime in August.

If your mindset is “the Convention is always the same” then the only reason that would be true is because you’re always the same. You get out of something what you put into it.

It’s hard for your vision to change when you sit there and stare at those same walls and same people day after day.

That’s why you need to go. You need inspiration. You need to see the possibilities. You need to go and learn something.

If you show up and find me I’ll give you a copy of my book, “The Little Used Car Book, Volume 6.” My little book is not a cure-all for your used car business but it’s guaranteed to give you some ideas and wisdom to help your bottom line.

By helping your bottom line, it will more than pay for your little trip. I’ll be hanging out at the vAuto booth (1718S), so look me up.

I’d hate to miss you this year. That’s all I’m gonna say. Tommy Gibbs

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