Ok, I don’t hate them, but I’m becoming less and less of a fan of them and I question if they are working as well as you might think they are.
As a new car dealer for over 20 years I found packs to be a useful and profitable tool to increase profits and flexibility.
Dealers that have packs use them in a variety of ways.
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 best use of them.
As for being against packs, 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.
It’s very much in the family of why we charge full retail in the service department to the used car department. Over the course of time charging full retail and packs didn’t hurt front gross and it actually made the dealership more money. 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.
They are not working from cost up like they did in the good old days. And, the salesperson has 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 get into the game, 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.
Every time you go to appraise a unit or go to the auction, those additional charges are running around in your head and are making it that much harder to acquire inventory.
I do believe that with better strategies dealers can improve their average gross profit…but, not by much…thus the only way to win the game today is to sell more used cars.
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 you’re still using packs keep using them if they are working.
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