Getting Back to Basics

I’m getting a lot of questions about inventory turn these days.

Many dealers admittedly expressing concerns about units they have let age.

Even though values remain high, dealers are starting to see a leveling off of the market and the upward spiral of values starting to come back to some sense of normalcy.

Lately I’ve been preparing for my NADA convention workshop titled, “Putting Common Sense Back Into Your Used Car Department.” As a reminder it’s in Dallas on January 26 thru January 29.

Just in case you’ve gotten a little lax, I’m going to share a few bullet points from that workshop that I’m confident will help you get back on track.

1. 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. If you are at $18,000 today, do what you can to get it to $17,500 and so on. There is no magical number.

It’s about keeping the less expensive units and making sure the more expensive ones turn fast. If you figure out how to reduce your recon cost on the cheaper units, then you’ll figure out a way to retail more. Having lower price used cars on your lot is going to becoming more and more challenging to do. Creating a great focus on this segment will pay huge dividends for you.

2. 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. Sooner rather than later. Make sure the service manager gets a copy of the list each day and create a sense of urgency to get any of those through the shop quickly.

3. 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. Yes, your inventory has gone up during these crazy times, but those days are likely to be behind us.

Everything, including decisions on what to keep and not keep has to be done fast. 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 take units to the auction and lose money on them at 45 or 60 days. There are certain “Trigger Points” you need to focus on during your daily “Trade Walk.” Knowing how to use EWR (Early Warning Radar) pays big dividends.

4. Lot Walk-If you do a lot walk once a week with all the members of your sales and management team then without a doubt you will sell more units. The lot walk gets your entire team to know and understand your used car inventory.
The more knowledge they have the more they sell. Don’t get confused between a lot walk and a trade walk. They are both different and they both play a major role in your success.

5. Daily Inventory Pricing-The market changes every day and so should your pricing. Sometimes you can ask more, sometimes you can ask less. You cannot and will not achieve maximum results by changing prices every 10 to 20 days. Pricing takes intense management. It’s not something you do when you get around to it. You would be far better off if someone priced the car who is not in charge of appraising and buying them.

“The Pain of Discipline or the Pain of Regret.”

Do the little things every day and you’re less likely to have much regret.
That’s all I’m gonna say, Tommy Gibbs.