Wholesale losses and the lack of gross continue to plague dealers around the country. Speed and common sense go a long way toward improving these two major issues.
The reality is they are both closely connected. If you’re going to reduce wholesale losses you have to be geared to take fast action and make early decisions on cars and trucks. If you are paying attention, that decision is easy because potential losers are sending you a message the minute they show up on your lot.
If you would take the time to look, then you would see. Improving gross is doable if you focus on selling fresh inventory. Selling a fresh piece at a premium has always been the "gross makers." Buying and selling into "today’s market" is the key to your success.
The only way you will ever get control of these issues is to be honest with yourself about every car, purchased or traded, that comes into your inventory. This newfound honesty occurs when all the members of the management team go on the "trade walk" each morning. Make sure you include all purchased cars in the "trade walk line."
This is the beginning of "Life Cycle Management." Once you have decided to keep a car in your inventory you should give it an Expiration Date, "ED." Some cars will get 20, 30, 45 and maybe a few get 60 days. Some units should be designed as an EWR unit. That stands for "Early Warning Radar." These units only get 20 days in the "Life Cycle." There are a number of factors that create an EWR unit:
1. Equity position (You’re upside down from jump street)
2. Make-a-Deal Car (Did you step up to make another unit go away?)
3. Odd Equipment (As in this car really needs NAV)
4. Previous Sales History (You have never done well with it)
5. Bad Color (You should know it when you see it)
6. No Experience (You like it, but don’t know squat about it)
7. Service History (Traded a customer out of it because they were driving the service department nuts)
8. Potentially Large Repair Bill (That’s why the service manager needs to be on the walk)
9. High Miles (2 year old car with 45,000 miles, hmm)
10. Suspicious CarFax Report (Might be a problem)
11. Gut Feeling (Sometimes it just doesn’t feel right)
If you stop and think about your oldest unit in stock you will come to realize that the reason it aged, aside from not pricing it right in the very beginning, was that when it first came into your inventory it had one or more of these issues attached to it.
Look at the list and see if you can spot one or more of those items on the list tattooed on the hood of your oldest unit in stock. It was there on day one, but because you didn’t exercise "Life Cycle Management" as a daily discipline you either didn’t see it or you ignored it. If you had utilized "Early Warning Radar" on day one, then it would have been gone by day 20.
When you assign all units an ED date and start the count down on day one, your intensity toward making that unit turn goes way up. It’s far different to view a unit as having 15 days left on its "life cycle" as opposed to it being 45 days old.
If you want to reduce wholesale loses and improve gross profit you need to pay attention to "Life Cycle Management." That’s all I’m gonna say, Tommy Gibbs