There are major changes coming to the automobile business. Change is never easy and the changes we are about to see are going to take many dealers way out of their comfort zone.
All dealers agree the Internet continues to drive grosses down. With few exceptions dealers are using either vAuto or other software tools to price themselves competitively in the market. Most have come to understand that price is the “driver.” The sad reality is price has always been the driver or at least the perception of a low price.
If your average gross continues to be hit hard by Internet pricing then the only way to make up for it is to do more volume. That takes us right to the heart of the issues and that’s being able to buy the cars we need in order to get the volume to offset the lack of big grosses.
There’s a lot of talk today by me and others about reconditioning cost and pay plans. I do think ultimately both of those items are eventually going to have to change. The bottom line is you are going to need to make some adjustments in how you price your service to your used car department and move to more of a volume pay plan for sales staff and sales management.
Your experienced sales people don’t like the direction the business has gone. They hate the fact that the price is set even before the customer shows up. They have no control over gross and they are not happy campers.
But, I think an easy fix to your struggle for volume is creating a different mindset for your used car buyer. What impact do you think it would have if your buyer did not have to be concerned with any recon cost and/or packs in his/her thinking? (The CarMax and Texas Direct Buyers don’t have to think about it and they buy and sell more cars than you do.)
What if you thought of reconditioning as simply another line item expense on your statement just like you think of advertising or supplies? If reconditioning and packs were not screwing up your “cost basis” then you could absolutely buy more cars and no doubt you would sell more because you would be in them right and have a pricing advantage over the competition.
No, it does not come out the same either way because you are now able to buy and sell more cars because of the “cost advantage” you have at the point of purchase. The more numbers you run through the store the more bottom line you have. It’s not rocket science.
When I say you can buy more cars, I’m also talking about buying more “trade ins,” which obviously allows you to make both more new and used car retail deals. Personally, I think this should be an easy concept for you to get your head around.
More and more dealers have gotten serious about the used car business. The winners will be those who can figure out a competitive edge. The competitive edge has always been one’s ability to buy cars. In today’s market it’s those who can buy the most cars and turn them the fastest who make the most money. That’s all I’m gonna say.