Two months gone and I’m thinking you’re either not happy with your volume or your average gross profit. It’s always one or the other. Trying to find the happy middle ground remains the question. I wanna see you be happy.
It’s a fact that you can make $3,000 a copy. It’s also a fact that if you do, the odds are pretty much against you when it comes to volume. Another fact is that in most cases your overall bottom line is impacted a lot more by doing high volume than high gross per unit.
Dealers by and large have figured out that if they use technology to price their used cars then customers will show up, especially when they price the cars in the top five in the market. Some dealers are starting to push back on the "turn the inventory as fast you can" concept and are moving to "let’s hold ’em longer" and make more money per car.
I understand it. I get it. Those dealers have become convinced that they can’t replace their inventory so why worry about turning it? If that becomes your long term strategy there’s a good chance you will wake up one day with lots of old stuff on your lot that you are stuck in.
Do I need to remind you about how fast the market can turn? Gas prices go up or gas prices go down and the market goes sideways. If you keep hanging onto inventory, there could be a very sad day at the "OK Corral."
Here are some tips to improving both average gross profit and volume which will ultimately make you a lot happier.
1. Do a better job of training the sales people (and sales managers) to sell the value of your company and the value of the vehicle, and your grosses would be a lot better. You begin to sell from strength not weakness when your team is educated.
2. Provide more information. The more information your sales people have about your inventory and how it’s priced to market the more likely they are to do a better job of convincing the customers you’ve got the best car at the best price. You have to sell the sales staff before you sell the customer.
3. Do more and better research. The more research you do on what’s hot and what’s not in your market the better off you will be. Grosses go up when you are selling a product that’s high in demand and low in supply. Key components for you to utilize are vAuto Stocking Tool, Auto Trader Data and data from Auto Count USA (Experian.) If you’re still making decisions on what to buy based on gut instinct you may want to rethink that. Research will also help you stock those units that are the most in demand, so you sell more and sell them faster.
4. Rethink "Buckets." Many dealers have become sold on buckets. Buckets are a solid discipline process, but you can’t take a position that all cars in the first 20 days are priced a certain way and at day 21 another and so on. There are some that need to be over market and some under market regardless of age. All cars have to be evaluated on their own merits and must be done daily, not in 15 or 20 day windows.
5. Track GAP and ROI. Dealers who are tracking GAP and ROI are seeing a big difference in their average grosses. If you’ve not bought into this process then maybe it’s something you should take a hard look at.
6. Fix your reconditioning timeline. If your most profitable car is a 20-day car (and it really is) how can you allow the service department to bog you down with it spending 7 to 10 days in the shop? This is one of those things that’s fixable, but it has to be done by the dealer. If the dealer wants to fix it then it gets fixed. Speed wins; the lack of speed kills. It’s as simple as that.
7. Re-do your website. How does your website look? Your website is the "New Showroom." Do your pictures tell a good story? Do you have 12 to 20 photos? If that’s all you have then you are not in the game. You need at least 40 and they need to be done in a photo booth. If you don’t have a photo booth you need to make a commitment to get one. Saying you don’t have the space is a poor excuse. You can make it happen if you want to. Kind of like the issue in service. You can fix it. You just need to do it.
8. Drive your average cost per unit down. The biggest no brainer since the invention of the wheel. If you want more volume, drive your cost down. If you want a better ROI, drive your cost down. If you really want to be in the used car business, drive your cost down. What is it you don’t understand about driving your cost down?
9. Install EWR into your "Trade Walk." Utilizing Early Warning Radar is essential if you are going to improve both gross profit and volume.
The used car department takes a lot of energy and effort to achieve the volume and gross you need to make big money. There is no one simple answer that will fix it for you. The key is to keep digging until you figure it out.
You can probably pinpoint some obvious issues that you know are holding you back. The faster you attack them the better. Spring is almost here. Summer is not far behind. The longer you wait to make some important decisions the more money you are leaving on the table and the less likely you are to be happy and clapping your hands.
I’m happy and I’m clapping because I’ve given you some more free information to help you improve your business. That’s all I’m gonna say. Tommy Gibbs