I cannot imagine why you would not do what I’m about to suggest.
This may be the simplest and easiest way to improve your overall used car business. Actually it will improve your overall business.
If you’ve ever heard me speak or read previous articles you’ve heard me talk about pressing your average cost per unit down.
Why should you focus on it? Because when your average cost per unit creeps up and the factory comes out with rebates, incentives, low interest rates, or employee purchase plans, you get crushed because you are sitting there with all that high dollar inventory.
The more you press your average cost down, the more used you will sell and the better off you will be. You end up getting in the used car business and out of the NEWSCAR (A word I made up) business.
You end up selling more units with fewer dollars tied up. Oddly enough most of your problem cars go away. Your ability to get on a 45 to 60 day aged inventory goes way up.
There is no set of circumstances you can lay out that negates this concept. So, if you were to say any of the following, you would be wrong:
We do a great job with highline cars. (Irrelevant.)
We do a great job with high dollar pick-up trucks (Irrelevant.)
We do a great job with high dollar SUVs (Irrelevant.)
We don’t have software that can separate our inventory by Cars, Trucks, SUVs and Wholesale Pieces (Irrelevant.)
You should require your used car manager (if you’re the used car manager, just do it) to print the report each morning, circle today’s average cost, and put his/her initials inside the circle and lay it on your desk.
So, what’s the magic number to get to? There is no magic number. Every dealer’s number will be different. If you are at $17,500 today your mindset should be how do you get to $17,000, then $16,500, then $16,000 and so on. The more you press your average cost down the better off you will be.
I find it interesting that when I’m speaking to a group, they think they are hearing me say go out and buy cheaper cars. No, that’s not what I’m saying. I fully realize how hard it is to buy cheap cars. But, what I am saying is it’s not so much about what you buy, but what you don’t buy.
If you are buying a high dollar car you have to buy it with great caution. You need to either have it sold, or have data to back up that it’s going to move fast.
One of the most important things you can do is to quit letting “Bubba and the gang” have your cheaper cars. There is absolutely no reason to not retail any vehicle that has a piece of life left in it.
You can present all the excuses you want, and they are just like the rear anatomy that we all have. You can help the cause by speeding up your recon and reducing the pricing from the service department to the used car department on your cheaper units.
There is no question that if you just pay closer attention to what you are buying and what you are keeping to retail that your average cost will go down. Only good things end up happening.
As you monitor your average cost it is going to bump up from time to time. There are two reasons for this. First, it’s because you traded in some high dollar stuff, which you will naturally have to do and second it’s because you got goofy and went to the auction and bought some high dollar cars.
In both cases it’s a matter of paying attention to it daily and getting back on track.
I’m often asked two questions:
1. What should my target goal be? There is no target, just try to get it lower than the day before.
2. Can I press my average cost too low? The answer is no. Don’t be concerned with that. If you do a good job with $27,000 SUVs, you will still sell $27,000 SUVs, but by pressing your average cost down it just makes you that much better.
Getting better is a matter of making things easy and simple. This is easy and simple. So why not? That’s all I’m gonna ask, Tommy Gibbs