Low Grosses?

Over the last few months, I’ve spent time with hundreds of dealers through zoom sessions, in-dealership workshops, 20 groups and one on one conversations.

The common theme in those conversations is that grosses are going south and the honeymoon is over.

So, the question everyone is asking is what can we do to stop the decline or better yet what can we do to improve grosses?

I’d first like to address that question with a question.

Are you giving away some units that you should not be giving away?

Historically whenever dealers have a respectable average gross profit, they have a few home runs tucked into the equation. Are you hitting any home runs?

As inventory levels improve, it’s easy to jump into the burn and turn mindset with ALL your inventory.

I’m betting you are selling some units short that you shouldn’t. You have great software tools. You have a brain. You should be able to figure out that there are certain units that you don’t need to give away.

I understand the challenge. You have a 10-day-old used car and you’re staring at a $3,000 gross, so it’s tough to say “no.” But, that might be the very car you should be making $5,000 on. A handful of these units each month can make a big difference in your average gross profit.

Another component of low grosses is the mismanagement of the life cycle of each unit.

Far too often you hold onto problematic units too long. They get deep into their life cycle and then you decide to either retail or wholesale it at a breakeven or loss because you’re feeling the “aging heat.”

If you had unloaded these problematic units earlier in the life cycle, even at a low profit, your overall average grosses would have been better. A small loss early is far better than a bigger loss later.

If you start tracking GAP (Give-away-Profit) you might discover that certain managers and/or salespeople are too quick to give up on your internet price. GAP is the difference between your internet price and your final sales price. If you’re struggling with front gross, tracking GAP might help you zero in on the culprits.

Another drag on gross profits is a lack of training.

Does your sales staff have awareness of the vehicles you have on the ground? Do they really know your inventory. How often do you do a lot walk with the entire team?  

Are they selling your awesome recon processes to your customers? Do they even know how you recon a car?

Knowledge is power. The more information your salespeople have about your product and your processes, the more your gross profit will improve.

Never forget that you make the most money on units you sell in 10 days or less. If you have a sloppy recon operation and you have units spending 7 to 14 days in recon, you’ve lost your best opportunity to make gross profit.

We all know you make your best grosses on trades and customer acquisitions. What are you doing to improve that segment of your business? Are you allowing one manager to dictate the value of your used cars? Two heads are always better than one.

Are you tracking look to book by salesperson and sales manager?

What about your trade ratio? How many units did you retail this month? How many had trades attached? Improve those numbers and you will improve your average gross profit. 

Everything I’ve shared with you here is important toward improving your used car grosses.

I’m betting my first bullet point is your number one issue.

Stop giving your good stuff away. That’s all I’m gonna say, Tommy Gibbs