Every now and then we all poke our heads above the fence, and sure enough, someone will throw a rotten tomato at us. I’m poking my head above the fence. Don’t throw too hard.
My subject today is those units that come back into your used car department that have previously been in loaner or rental car service.
Most of the time they are just a few months old, nice cars, with low miles. They quickly become aged units in the dealer’s used car inventory that don’t make the used car department any money and worse than that, they are a source of great frustration for all.
There are solid and legitimate business reasons for having loaner/rental units as part of your business model. I get that.
The problem is they aren’t curtailed/written down enough while they are being utilized in your fleet and when they come out of service the dealer expects the used car department to save the day by retailing out of them.
Dealers sell them to the used car department based on what they have in them not based on what they are worth.
You sometimes try to justify to yourself that they are worth what you have in them because they are brand new units. They are not brand new units. By and large they don’t have new car incentives attached to them and in most states they have to be sold as a used car.
Ask yourself, if you went to the auction what would you pay for them. Hey, there’s a thought…why haven’t you taken them to the auction? Because you know they aren’t worth what you have in them. This ain’t rocket science.
Another piece of this equation is that these units have to compete with your new car business. It’s an impossible task that you are bestowing upon your used car department to retail you out of units you are super high in.
These units are probably worth $2,000 to $4,000 less than what you are selling them to your used car department for. Do you think your sales staff wants to sell units that you are so buried in? And you wonder why they are aging on you.
These units are costing you business left and right. Why would a used car manager want to step up on a similar trade at the front door when they know they have 15 units sitting out there right now, and probably another 10 on the way? (Read THIS from a week ago.)
These are dead units taking up space and dollars in your inventory.
If you want to get real, you should sell them to the used car department for the right money and share the write down expense with all departments. All departments, especially the parts and service departments, benefit from having loaner cars at their disposal.
This situation isn’t going to improve in the long term unless you take the advice I’ve just given you.
In the short term, you need to re-appraise all those units. Eat the loss, give them a new birthdate and put my life cycle management process in play.
I said you weren’t going to like this. We often don’t like the truth. I’m telling you the truth. Let the tomato throwing begin. That’s all I’m gonna say, Tommy Gibbs