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

It’s pretty much a given that we need to speed up the selling process. The one step that we need to be conscious of when it comes to speeding up is the used car appraisal. Far too often we are short-cutting the appraisal and in the end it costs us big money.

It doesn’t take that much longer to do it right. There are four parts to the appraisal:

1. The customer’s self-appraisal
2. The technical
3. The show
4. The presentation

The Self-Appraisal-Require the customer to show you their car. Ask the right questions. The more you ask the more they will tell. Generally the more they tell the more they help to de-value their vehicle in their own mind.

The technical – You drive it. You park it. You walk it. You check it. You open the hood. You open the trunk. You snoop it. (Look for treasures in the glove box.) All of this takes place away from the dealership.

The show – When you bring it back to the dealership, park it in a conspicuous place and put on the show. You touch everything you can touch hoping that the customer sees you touching those scratches, dings, and tires. The show can be done before or after your appraisal ride. The key is that you need to do it when it’s most likely the customer is watching. Even if the customer doesn’t see you, hopefully the sales person sees you. Now that they know what you know, hopefully they will work harder on selling the customer than on selling you.

The presentation – This is critical. It doesn’t have to be done by management, but it’s more effective when done so. Part of the presentation is the paper work. A detailed printout, with comparisons and supporting documentation will have a powerful impact on the customer’s thinking. Think of the presentation as a sales presentation for the justification of the value.

Speed is important, and at the right time so is slowing down. There’s a term in the racing world called “slowing down to go faster.” In this case slowing down will make you more deals and more money. That’s all I’m gonna say, Tommy Gibbs

Whether you’re buying cars at the auction, trading for them at the front or buying from the public, the number one reason you can’t acquire more used cars is that you won’t pay the price.

It’s that simple. You and your used car manager can spin it any way you want, but the bottom line is when you or they see a car that you would like to have on your lot you will not step up and pay the price. There are logical reasons for this, most of which need to go away.

Let me dissect this deal for you. The odds are pretty goodthat your internal labor rate is $75 to $125 depending on what part of the country you are in. Your average reconditioning costs are running $800 to $1400 depending on a couple of things.

One of those things would be that you are in the “Newscar” business as opposed to being in the “Used Car Business.” Oh, I know you think you are in the used car business, but you aren’t. “Newscars” is when you carry a lot of late model stuff.

Sure your recon cost is lower because you’re not spending a lot of money on these cars as they still have factory warranty. (Bad strategy that happens when your used car manager gets tired of getting killed every time he/she sends an older car into service.)

Or, if you are a big time “Certified Dealer” then your cost per unit would be higher because of the factory requirements.

So let’s round the reconditioning number off to a nice $1000 per copy. (Do your own math if you don’t like mine.)

The next part of this dissection is those wonderful little packs you add on to protect yourself from paying too much in salesman’s compensation and other little safeguards you feel you have a need for. I come from the “Pack Generation.” Always loved them. The business has changed. I’ve changed and you should change too. (Many of you think I’m against packs. I’m not. If they are working for you I say “Keep using them,” but I question if they are working as well as you think they are.)

On average, hard and soft packs combined run $500 to $1000. So let’s round that number off to $800. When you add my little rounded off numbers from the reconditioning and packs you have a total of $1800. (The problem with the pack and recon “drug” is that it still sorta works and you can’t shake ‘da habit.)

So as I often say, “Here’s the deal.” You are starting off from “jump street” with an $1800 cost disadvantage against those dealers who aren’t doing it the old fashioned way. (CarMax and Texas Direct to name just two of them.)

We can debate the way you charge the sales department in service all day long. But your theory of if we don’t charge them full retail (or close to full retail) that they will just give it away in the sales department is “old, tired and a worn out” theory. (I know, I know, it’s still sorta working.)

You cannot continue to rely on the sales department to prop up the service department. Sooner or later the folks in service are going to have to get better with how they sell and develop your customer base.

Propping up service is much like the unemployment checks people have been getting the last few years. As long as the government keeps handing them checks then there isn’t much sense in them getting out and looking for a job.

What compounds the problem is your pay plan. As long as you keep paying sales people and sales managers on gross you are going to fight a losing battle. Yes, this is a hard one for you to get your head around, but sooner or later you gotta “get real.” There’s a total cultural change coming. You can lead it or follow it. It’s your choice.

Just think about it for a minute. You put killer used car prices on the Internet and now you’re starting to put killer new car prices on the Internet. Aside from doing the right things when the customer shows up, how much control do the sales people and sales managers really have on gross profit? Ok, they have some, but not as much as they used to have.

What if you changed the pay plan and took gross out of the equation? Under that scenario what you charged in service and the need for packs would be irrelevant.

What if you thought of reconditioning as simply another line item expense on your statement just like you think of advertising or supplies? Keep in mind this article is all about “Why you can’t buy more cars.”

If reconditioning and packs were not screwing up your “cost basis” then you could absolutely buy more cars and no doubt you would sell more because you would be in them right and have a pricing advantage over the competition. When I say you can buy more cars, I’m also talking about buying more “trade ins,” which obviously allows you to make both more new and used car retail deals.

There is no doubt this is a difficult cultural shift for your business just like what’s happening to you with the Internet moving you towards “One Price.” You’ve been successful doing it the “Old Fashioned Way,” but you are going to find it harder and harder to do so.

I’ve asked this question a lot lately: What if you had a clean sheet of paper and started over from scratch; how would you do it in today’s world? That’s all I’m gonna say, Tommy Gibbs

Not a week goes by that I don’t get several requests from dealers looking for a used car manager. The actual question is whether I know of an experienced used car manager that they can hire.

While there may be some short-term gain by going outside to hire, generally speaking it’s not going to be a long-term gain. We all know we are better off to develop our own team rather than going outside.

Either way, there’s going to be some pain involved.

If you promote an insider and you do some things right, you will reduce the pain and have a lot of long-term gain.

As the GM or Dealer Operator, the first thing you need to do is to commit yourself to the used car department. Regardless of what you think you know or don’t know about the department, you and the new used car manager need to become co-used car managers.

The two of you need to learn this job together.

This is important for a bunch of reasons, none more important than the two of you figuring out where the obstacles are that have been holding your department back. If you will absorb yourself in the used car department you will see amazing results.

Attributes of the right candidate:

1. A strong work ethic.
2. A coaching “receiving and giving” attitude.
3. A young thinker. They don’t have to be young. They have to think young.
4. An understanding of technology and the role it plays in our business.
5. Great confidence, tempered by a small ego.
6. Team player. They have to be able to get along with members of all departments. Most important they have to be respectful of others.
7. A burning desire to learn and succeed.
8. The will to win by being willing to prepare to win.
9. Passionate about car business.
10. And of course they have to be honest. Duh…but, honesty also includes that they are honest with themselves and they don’t look to blame others when things don’t go their way.

Think about it this way. If you have to keep going outside to find people to fill management spots maybe the real problem is that you haven’t spent enough time developing the staff that you have.

If you’re doing the right things, the person you should promote will be right under your nose.

That’s all I’m gonna say. Tommy Gibbs

If you have cars aging on you and you are dumping them in the wholesale market and losing money, then you are totally on the wrong path.

If you are paying attention to the right things and if you understand that you are in the retail automobile business there should be very few units you blow out and lose money on. It’s about retailing cars before they get to the end of the cycle.

1. It starts by selecting the right inventory. Unless you are an exception to the rule, most of those aged units are auction purchase cars. There’s nothing wrong with buying auction units, but you have to think “hole fillers” and “short life cycle.”

2. Tackle my “Life Cycle Management” concept-like your life depends on it, because it does. You are either getting tired of hearing me talk about it or you have started utilizing it. Software is coming to help you. You will never get your inventory under control as long as you allow all units to have the same number of days on the shelf. You have to identify and acknowledge what each car is on day 1 not day 61.

3. Making smart and quick decisions on trade-ins you bury yourself in-Happens all the time. You step up for whatever reason, but since you don’t use “Life Cycle Management” you treat these units just like every other unit. Look Einstein, if you buried yourself in it on day one it’s only going to get worse. The best thing you can do is price that unit below market and make it disappear.

4. Don’t get too excited-about a successful short term run. It will kick your butt every time. Stop it. All of a sudden you have a strong 30 day period when you sell 10 XYZs. For whatever reason they were hot. So, what do you do? You run out and buy 20 more of those bad boys. And guess what happens? They sit and they sit. And now you have some more huge wholesale losses staring you in the face.

If you go back and analyze those first 10 you popped out like hotcakes you will probably find something unique and special about those units. Might have been miles, might have been color or it might have been the price of gas during that stretch that influenced those sales. I’m not saying you shouldn’t get excited and try some more of those hot babies, but you need to be smart enough to keep your enthusiasm under control. You have much more control when you take them in small doses rather than choking yourself to death.

5. Understand that you are in the retail business-You need to make sure you are pricing your cars to market early enough and attractive enough to find a retail buyer early in the life cycle. In most cases, if you analyze your aged units you will discover that for whatever reason you overpriced them too long. Key words here are “too long.”

When you are retailing your retail pieces you don’t have to worry about aged units and wholesale losses. That’s all I’m gonna say, Tommy Gibbs

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