I think my first experience using the “V” word was when I went on a camping trip. Ok, it wasn’t a camping trip as such. I was actually having the time of my life at the Marine Corps boot camp, Parris Island, SC. It was there that I first used the “V” word.

The M14 rifle has a muzzle velocity of 2,800 feet per second.

Up to that point in my life I had never used the word. Heck, I probably didn’t even know what it meant. Speaking of meaning, since it’s become such an ugly word to some, I decided to look it up.

VELOCITY:

1. Rapidity of motion or operation; swiftness; speed: a high wind velocity.
2. Mechanics. The time rate of change of position of a body in a specified direction.
3. The rate of speed with which something happens; rapidity of action or reaction.

To keep things simple, my takeaway is that velocity simply means speed. There’s a book out by Jason Jennings and Laurence Haughton that has the perfect title for the automobile business, “It’s Not the Big that Eat the Small…It’s the Fast that Eat The Slow.”

I could not find anywhere in the many definitions I looked up where it said:

“Velocity-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.”

I have a new 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.

This nasty “V” word often comes up in 20 group meetings and beyond. The complainers are the ones who want to blame someone else for their woes such as a lack of front gross profit.

You can make one of two choices.
1. Hold high gross profit per unit.
2. Do lots of volume at a little lower gross.

Which way do you think is going to pile up the most gross to pay the bills at the end of the month?

Back in my day if you shot an M14 rifle and you didn’t hit the target, you didn’t blame the velocity of the rifle. You blamed the poor marksmanship.

Dealers have been known to complain that when they went on the velocity method of pricing their used cars to market, their grosses went south. Well duh, of course they did. You had to fix your sins first.

One of the main reasons the gross went south, especially in the beginning, is they had aged units on hand. And, lo and behold, when they finally priced them correctly to the market they got killed. Well, no kidding, of course the grosses went down. Those dealers were buried in the cars and they finally priced them right. What else could they have expected?

When you first buy into the velocity concept there’s going to be some pain. It’s the prolonged pain you have been putting off. You’re now paying for the sins of your ways.

And there will continue to be pain unless you use your brain. I like that, “Pain, if you don’t use your brain.”

You cannot have the mindset that the software is going to save your butt. You have to use your head in order to hit the target.

It’s just like shooting the rifle. The bullet traveling at a high rate of speed is only going to hit the target based on the shooter’s skill.

If you’ve been missing the target using the velocity method maybe you need to sharpen your skills. That’s all I’m gonna say, Tommy Gibbs

Many dealers struggle with reconditioning, either that it takes too long to get a car done and through the system or they are paying too much to get it done. Often they complain about both.

I’ve said it before and I’ll say it again, most of these problems can be fixed if the dealer really wants to fix them. The dealer has the power to fix anything they want to fix. A simple step to improve the situation is to hire a “Chaser.”

A “Chaser” will gain you a few days in recon and reduce your recon expense by a couple hundred dollars per car. Maybe even more on both ends.

A Chaser is someone who does just that. They chase the used cars through the system. This is not a high paid position; somewhere in the $3000 range per month. It’s a person who has solid mechanical knowledge, good people skills, attention to detail and the ability to communicate with the sales department and the service department.

Think of them as being in an assistant manager category. It is not the same as having a dedicated service advisor or used car technician.

The chaser has a single minded focus with no other agenda. They will never let a car sit for even one day while it waits to go from service to clean up. If clean up is backed up they will start kicking and screaming to find a solution, whereas the service adviser is thinking “next” in terms of his/her own next repair order opportunity to make some money.

The Chaser is an employee of the sales department but spends most of their time in service. They need to have a certain amount of approval authority so they can speed things up for you.

I often hear dealers say they already have that, as they give the service department the latitude of spending X dollars per car without having to get approval.

Really? Let’s say you give them $800 without asking any questions. I can promise you you’re going to get a lot of $800 tickets. It’s human nature. That’s like the sales manager who says I’m only going to accept a $1000 deal. Well, you’re going to get a lot of $1000 deals. People take the route of least resistance. You won’t see too many $500 deals and you’re not going see too many $2000 deals.

The Chaser needs to have enough mechanical knowledge to know when to hold them and when to fold them. They won’t let the wool get pulled over your eyes.

They are there, in part, to protect and assist the used car department with the ultimate goal of speeding things up.

Part of their pay plan might be based on average recon cost and the average number of days to get a car to the front line. Of course you have to be careful that they don’t go too far on the saving money part. You’ll be able to tell if your policy account and complaints go up, so don’t be too concerned if you elect to make it part of their pay plan.

The chaser is going to gain you some days in recon by doing…well, just that. They are chasing the cars through service. They chase the cars and they push the cars through each station. If things get backed up they are looking for a solution on how to make it happen.

Many dealerships rely on the used car manager, service writer or, in some cases, the service manager to handle these duties. And, for the most part they don’t have the time, expertise or focus to make it happen.

You may be sitting there reading this thinking, geez, I don’t want to have to hire any more people. I get that, I understand that. I have a question for you. How much do you have to save per car in recon or gain in days through recon for the Chaser to more than pay for themselves? That’s all I’m gonna say, Tommy Gibbs

“It doesn’t take talent to play hard.”
Derek Jeter

Some of the most successful dealerships have an all out assault on trying to buy cars from the public and their customer base.

Buying cars at the auction can help you fill some holes, but the reality is you need to turn those units pretty darn fast. More often than not, you’re paying more for them than you are for those at the front door.

Mark O’Neil, the former CEO of CarMax, told me a few years ago, the number one thing that turned the CarMax operation around was when they started a big push on buying cars from the public.

Are you focused on stepping up when a customer has something to trade? Are you really putting “all the money” on it?

Have you upped the intensity with the concept of buying more used cars from the public?

Have you upped the intensity of buying more used cars from your customer base?

Are you really making the effort? Do you have signs in the customer lounge telling the customers you want to buy their cars?

Do you have a board posted in the lounge advising your customers of the cars you’re looking for?

Have you put a process in place for the sales people on how to handle customers that want an appraisal on their cars? I mean a real process with a real appraisal they can take with them good for 7 days?

1. Step up on the trades.
2. Make sure you have processes in place to handle those customers trying to sell to you.
3. Make sure you are mining your customer base for cars you can sell.
4. Post signs in the customer lounge that tell your customers you want their cars.

None of this is rocket science, but with a little more focus, and a whole lot more effort, you will find some of your most profitable used cars located right under your nose.

Start playing a little harder. And a little smarter. That’s all I’m gonna say. Tommy Gibbs

So, 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. That’s all I’m gonna say, Tommy Gibbs

The most misunderstood topic I discuss in my workshops are SETS & SUBSETS. If you’re anti SETS & SUBSETS you might want to read just a bit further.

I will be the first to agree SETS and SUBSETS are not for everybody. They are especially not for you if you haven’t solved a lot of your other used car issues.

I’m not going to try to sell you on SETS & SUBSETS, but I do want to show you that first, it’s not all that complicated and second, it’s something you’ve done with success in the past in one way or another.

SETS & SUBSETS are all about setting up a price leader to drive traffic to the store.

What’s so bad about that? Don’t you do that right now? I have to believe that in one way or another you do it with your new car business, so why not do it with used?

The lead or number 1 car is the most important car in the SET. You can do SETS in 2, 3, 4, or 5 car SETS. Experience has taught me that going deeper than 5 just confuses the issue and makes it much more difficult to manage.

If you had 5 similar cars and you wanted to advertise them as a group (you did this back in the program car days), wouldn’t it make sense to advertise the least desirable of the 5 as a price leader in hopes of driving traffic to the other 4, or better yet, to your store?

The lead car is simply the least nice of the group. Make it safe, but don’t make it too pretty. This is not about bait and switch. It’s about the customers transferring themselves to another car in the SET or to one out on the perimeter.

The key to SETS is picking the right lead car. It needs to be desirable in the “public’s mind,” and most important is that it should be the latest model you can find for that SET.

Two of the biggest mistakes that dealers make are trying to make a profit on the lead car and picking too nice of a car to be the lead.

The lead car is a “loss leader.” More often than not the car that dealers pick to be a lead is really a number 2 car. A 2 car is a profit maker and one that you’ve fully reconditioned, so you would want to make sure you haven’t made it the lead.

If you want SETS to work, you have to advertise your lead car at what you have in it or less. If you try to make a profit on the lead car the traffic probably isn’t going to show up. The sole purpose of the lead car is to drive traffic to the dealership.

When done correctly one of three things will happen:

1. The customer shows up and buys the lead car.

2. The customers transfer themselves to the 2, 3, 4 or 5 car.

3. The customers buy something out on the perimeter.

The key is that the customers showed up on your lot today and you have a chance to sell them something.

So, there it is. SETS described in its simplest form. It’s not all that complicated or any great trickery with the consumer. You’re just advertising a price leader and giving the customers some other choices when they show up.

That’s all I’m gonna say, Tommy Gibbs

If you’ve heard me speak you know the subtitle of my workshop is, “It’s Not The Big That Will Eat The Small, It’s The Fast That Will Eat The Slow.” I stole that title from a book by Jason Jennings and Laurence Haughton. Bottom line is speed is critical to the success of your business.

Your used car business and your overall business model require you to be able to travel at the speed of Mach 5. You have to think fast and move fast in today’s market.

I often refer to the lack of speed as “drag points.” Drag points are those places along the way that drag you down, hold you back, destroy morale and make you very inefficient.

Some typical “drag points,” are:

1. Car sits too long before someone makes a decision on what to do with it.
2. Car spends too many days in the mechanical shop due to shop or parts issues.
3. Car sits a few more days before it gets into “clean up.”
4. Car takes too long to get out of clean up.
5. Car sits too long before photos are shot.
6. Car’s photos aren’t posted online in a timely manner.
7. Car’s price changes are made too late in the cycle.

Most dealers would tell me they get their used cars through the system and ready to go in 2 to 3 days. The reality for most is it takes about 7 to 10 days.

The fact of the matter is you make the most money on a car in the first 20 days. If it’s hung up in the system for 10 days you just blew 10 of your best selling days.

Yes, I’m simply telling you something you already know. But knowing something and fixing something are two different things.

The Dealer, the Executive Manager, the General Manager or the Owner Operator has the power to fix any and all of those issues.

Sadly, some can’t or won’t make the changes necessary to put the store on the fast track. So, they stay on the slow track to nowhere. Speed wins. That’s all I’m gonna say, Tommy Gibbs

I love winning. I love winning at anything. Sports, checkers, or the game of business. You name it and I love winning.

In last week’s newsletter I said I wanted to be sold on the logic of keeping inventory longer because used cars are hard to find.

That newsletter was written to see if someone could justify holding inventory past 45 to 60 days just because they can’t find replacement inventory.

I was very sincere when I said in the newsletter to “sell me” on the logic behind doing so.

Over 7,000 people get my newsletter each week. I get an extremely high open rate. Sometimes as much as 30%. Trust me, that’s a big number.

Now guess how many people attempted to sell me on the strategy of keeping cars longer? None. Not even one.

If you won’t try to sell me, how are you able to sell yourself and your staff? Sometimes I think someone is selling you on a bad business strategy instead of you doing what you know is the right thing.

Many of you are winning because you know turning your inventory in 45 to 60 days always wins. Yep, I win, you win, we all win when you turn your inventory. I love winning, that’s all I’m gonna say. Tommy Gibbs

I’d like to think I’m a great salesman. Most great salesmen are easily sold. I wanna be sold. I’m begging to be sold. I’m begging you to sell me.

So come on, sell me on why it’s ok for you to keep used car inventory past 45 to 60 days. Recently, I’ve had a few dealers tell me inventory is so hard to find that they are keeping cars longer.

How does that help your inventory problem? Come on, sell me.

Does keeping a car longer ever make you “more money?” Come on, sell me.

Do you make a greater ROI when you sell a car at 90 days vs. 30 days? Come on, sell me.

When you keep a car longer, do you make more money on it than if you sold it sooner? Come on, sell me.

You can’t get the units through reconditioning fast enough so you want to keep them longer? Come on, sell me.

You can’t find inventory so you want to hold them longer? Come on, sell me.

The big volume players such as CarMax and Texas Direct have to buy most of their inventory. You can’t find cars, so that’s a valid excuse for keeping them longer? Come on, sell me.

Do you really think holding cars longer is the answer? Come on, sell me.

I’ve never had a dealer who was committed to a short turn say they regretted the strategy. I’ve had lots of dealers regret keeping cars past 60 days. Come on, sell me.

I like being sold. Come on, sell me. I’m waiting. I’m still waiting to be sold. That’s all I’m gonna say, Tommy Gibbs

It’s that time of the year when dealers attempt to increase their used car inventory in order to take advantage of the summer selling season.

There are many sources for acquiring inventory and more often than not some of them are right under our nose and we either can’t see them or choose to ignore them.

I was at the CarMax store in Clearwater, FL recently and spoke with a very chatty sales person. He proceeded to tell me that 70% of the traffic they get at that CarMax store is from people who want to sell them a car.

Do you think their campaign of “We will buy your car even if you don’t buy ours” is working?

If you have not put a big push on to buy cars in your market maybe it’s about time you did. You may not get instant results, but over time you will. You must remain consistent in your advertising and marketing of the concept.

You will be wasting your time and money doing so if you do not set up internal procedures to handle these sellers when they show up. It’s a combination of the paper work, the offer, the documentation of the offer and the way the sales person greets and handles the customers when they show up that makes it successful.

What CarMax has figured out is that the person showing up to sell them a car is a “Customer.” They don’t treat them any differently than someone who comes in to buy a car. They all get the “full routine.”

One of the things we all know to be true is we get the nicest cars and trucks at the front door. Without exception almost every dealer and manager I work with will tell me “We never missed a trade at the door.” Really? Do you really believe that?

If you are not using the vAuto appraisal tool then you should. You should be tracking “Look to Book,” for your store and each manager who appraises used vehicles. You should always be looking to drive your “look to book” up. Don’t fool yourself by thinking a certain percentage is acceptable unless it’s 100%.

Yes, that’s silly, but that should be your thinking. Until you get it to 100% you haven’t gotten it right. Duh, you never get it right.

You should demand that every vehicle that’s appraised is put in the system. Since I know you are holding a “Save-A-Deal” meeting every morning you should make sure that you review every appraised trade from the day before during the course of that meeting. You’re going to find some cars in that stack that you will now go back and put some extra money on. Voila, you make another deal and get another nice used car or truck for your inventory.

One of the greatest opportunities to find more cars and trucks is from your existing customer base. This list can be a powerful marketing tool for finding great cars and trucks to sell. You absolutely know which cars of your own brand you do well with. You should be contacting these customers via direct mail or email with an offer to purchase their vehicle.

I go after my customer base each week by staying in touch with you via this newsletter. It’s my way of asking for the business. One way you can stay in touch with your customer base is by letting them know you want to buy their car or truck. It’s not rocket science, it’s just smart. That’s all I’m gonna say.Tommy Gibbs

This may be the simplest and easiest way to get out of the NEWSCAR business and into the used car business. Most new car dealers are not in the used car business. Most are in the NEWSCAR business.

That’s when the average cost per unit in your inventory keeps creeping up and up and before you know it you are too close in price points to your new car inventory.

When average cost of your inventory moves up and up and the factory comes out with rebates, incentives, low interest rates, or employee purchase plans, you get crushed because you are sitting there with all that high dollar inventory.

The more you press your average cost down, the more used you will sell and the better off you will be. You end up getting in the used car business and out of the NEWSCAR business.

You end up selling more units with fewer dollars tied up. Oddly enough most of your problem cars go away. Your ability to get on a 45 to 60 day aged inventory goes way up.

There is no set of circumstances you can lay out that negates this concept. So, if you were to say any of the following, you would be wrong:

We do a great job with highline cars. (Irrelevant.)
We do a great job with high dollar pick-up trucks (Irrelevant.)
We do a great job with high dollar SUVs (Irrelevant.)
We don’t have software that can separate our inventory by Cars, Trucks, SUVs and Wholesale Pieces (Irrelevant.)

You should require your used car manager (If you’re the used car manager, just do it) to print the report each morning, circle today’s average cost, and put his/her initials inside the circle and lay it on your desk.

So, what’s the magic number to get to? There is no magic number. Every dealer’s number will be different. If you are at $14,500 today your mindset should be how do you get to $14,000, then $13,500, then $13,000 and so on. The
more you press your average cost down the better off you will be.

I find it interesting that when I’m speaking to a group, they think they are hearing me say go out and buy cheaper cars. No, that’s not what I’m saying. I fully realize how hard it is to buy cheap cars. But, what I am saying is it’s not so much about what you buy, but what you don’t buy.

If you are buying a high dollar car you have to buy it with great caution. You need to either have it sold, or have data to back up that it’s going to move fast.

One of the most important things you can do is to quit letting “Bubba and the gang” have your cheaper cars. There is absolutely no reason to not retail any vehicle that has a piece of life left in it. You can present all the excuses you want, and they are just like the rear anatomy that we all have.

There is no question that if you just pay closer attention to what you are buying and what you are keeping to retail that your average cost will go down. Only good things end up happening.

As you monitor your average cost it is going to bump up from time to time. There are two reasons for this. First, it’s because you traded in some high dollar stuff, which you will naturally have to do and second it’s because you got goofy and went to the auction and bought some high dollar cars.

In both cases it’s a matter of paying attention to it daily and getting back on track.

I’m often asked two questions:

1. What should my target goal be? There is no target, just try to get it lower than the day before.

2. Can I press my average cost too low? The answer is no. Don’t be concerned with that. If you do a good job with $25,000 SUVs, you will still sell $25,000 SUVs, but by pressing your average cost down it just makes you that much better.

Getting better is a matter of making things easy and simple. This is easy and simple. That’s all I’m gonna say, Tommy Gibbs