As a new car dealer for over 20 years I found packs to be a useful and profitable tool to increase profits and flexibility.
My favorite as a dealer was to use the pack money to step up on trades when we needed to make a deal. We all think differently when it comes to how to make the best use of them.
I tell dealers all the time “if they are still working, stay with them.” I just question if they are working as well as some dealers think they are.
I believe that in the big picture they have outlived their usefulness. If you review the history of packs, they came about in part because managers worked from cost up. Dealers figured out that if the manager’s target for front gross was $1000, that they would hit that number if they had packs or not.
Over time packs have become their own profit center.
These theories and concepts have worked well for a long period of time. The Internet has dramatically changed the game. More and more dealers are pricing to market vs pricing based on what they have in the car.
Dealers are not working from cost up like they did in the good old days.
Salespeople have very little control over grosses, as the price has been set before the customer even shows up.
As more and more dealers move away from paying salespeople on gross it makes very little sense to add packs to your vehicles.
As my good friend Dale Pollak likes to point out, packs are nothing but a tax on your vehicle. You are taxing yourself and making it that much more difficult to be competitive.
As more and more of the likes of CarMax, Varoom, Echo Park, Texas Direct, Carvana, Penske, Auto Nation USA are cranking up the pressure to source cars and trucks, the less relevant packs (taxes) will become.
When you’re being charged full retail in service and you also have packs, you are adding additional cost to your inventory that others don’t have.
When you pack your vehicles, you’re shooting yourself in the foot.
Every time you go to appraise a unit, buy from the public or go to the auction, those additional charges are running around in your head and are making it that much harder to acquire inventory.
If you’re going to sell more used cars you have to be able to get more used cars. To get more used cars you have to have an acquisition advantage. Packs create a disadvantage in today’s market.
If packs are still working for you, then keep using them.
But, you should keep asking yourself if they are really working as well as you think and if they are putting you at a disadvantage in the marketplace.
I don’t hate packs, but I do hate it when we lie to ourselves.
That’s all I’m gonna say, Tommy Gibbs.