You probably fit into one of two categories. Either you are not happy with your average gross per unit or you are not happy with the volume of your used car department. In either case you also may not be happy with the total gross being generated.
Let me remind you that the only thing that is really important is how much total gross you are generating. I always say, “You cannot spend average gross profit. You can only spend total gross profit.”
It’s a contradiction to say to your staff that you expect both high volume and high gross per unit. They stay confused and frustrated when you keep pounding them over the head with this misdirection and slight of hand marching orders. I’m sure somewhere out there someone is making it happen on both ends, but it is certainly the exception and not the rule. So, you need to get over it.
It’s a given that more than 80% of the people shopping a used car shop the Internet. If you think you are going to post high prices or no prices out on the Internet and traffic is going to show up then you are dead wrong. The Internet is a “game changer” for all of you regardless of your new car franchise or set of circumstances.
You have to decide if you want to play the game. More importantly you have to decide if you want to win the game. It’s a game. There are winners and losers. As Dr. Seuss said “You have brains in your head. You have feet in your shoes. You can steer yourself in any direction you choose…”
If you are going to improve volume you absolutely must develop a sound acquisition strategy other than just going out and buying more cars. Without allocating the right resources and strategy then going out and buying more inventory is the kiss of death. All that’s going to happen is it’s going to age on you and you’re going to be real unhappy a few months down the road.
Taking this leap into the volume world means rewriting your overall strategy from acquisition to staffing, pay plans, reconditioning, marketing, and pricing. Failing to address any of these will result in frustration and poor production and you may find yourself worse off than you are right now.
Here’s A Ten Step Plan to Success:
- Take over your used car department. If you’ve not read my article on this subject click here. Read Full Article
- Restructure your management team or at least re-think the duties of your current staff. If you are going to acquire the right cars then someone is going to have to do the research that’s necessary to get the job done.
- Learn all you can about the vAuto stocking tool, Auto Trader, and Auto Count USA. You need a geeky person to study the data and make recommendations on a daily basis.
- Once you’ve done the research you have to have a plan of acquisition based on who and how you will acquire the inventory. Elements of the plan:
- Purchasing units from private individuals.
- Mining your database for hot sellers.
- Purchasing cars at auctions.
- Purchasing cars online which may include proxy bidding.
- Taking an aggressive approach to trade-ins.
- Move from paying on gross to paying on volume for sales staff and sales management. Is it time to re-think “One Price?” The Internet is creating a one price environment. Twenty years ago when a lot of dealers tried “One Price” the Internet was not a factor. One of the major frustrations your sales staff continues to have is when the customer shows up at the front door with a price off the internet your sales staff has no control over gross.
- Re-evaluate how you are charging for reconditioning. Is it time to re-think the age old concept of charging full retail to the used car department? (If you move away from paying sales people and sales management on gross profit then the concept of charging them full retail because they are going to just give it away becomes irrelevant.) You can keep doing it your way, but you will be at a disadvantage in the Internet world pricing game.
- Get rid of packs and all the silly things you add to the cost of your used cars. All you are doing is putting yourself at a pricing disadvantage. Reread numbers 5 & 6.
- You need to price your inventory online immediately and then re-price it as the market is moving. Determine if your pricing should be under or over the market from day one. The more days you are over market, the more days are being eaten up and ROI goes south. And most important who will be doing the pricing? The last person in the world that you want doing the pricing is the person who’s actually doing the buying. Their egos and feelings get involved. This is not about egos and feelings; it’s about pricing the vehicles based on the market and about turning them as fast as possible.
- Invest in your own photo booth and commit to posting 40 plus pictures on every unit. You must set yourself apart from the competition. Having pictures that have “changed seasons” is just plain ignorant for more reasons than just the pictures. (Get it?) There should never be a day that you have cars online without pictures.
- Use the vAuto Internet pricing tool. There is no excuse for having a car without a price on it. Post prices online and on the cars. Get rid of all the excuses as to why you don’t want to put prices on the cars. It’s just plain silliness not to.
So, let me give you a quick review. The bottom line should be to increase your total gross profit. It’s not done by improving your average. It’s done by maintaining a respectable gross and substantially improving your volume. Small market or big market, it doesn’t matter. The Internet has opened the world up to you and you have to decide if you want to be in that world or your own little world. Your little world has limitations. The Internet world does not. That’s all I’m gonna say. Tommy Gibbs