Categories
Car Auction Retail Car Lot Wholesale Lot

Used Car Profit Hacks

When it comes to used car profit, dealers constantly consider the resale value of their inventory. Having a profitable, well maintained inventory can make a huge difference when it comes the speed in which you turn your used car lot.
Here are some simple tips on how to increase the value of your Used Car Inventory.

Wash Your CarsCleanliness Matters

Keeping your cars clean isn’t just for cosmetic appeal, it can seriously affect your cars value. As a percentage of profit improvement, a clean car has the most impact on value for the least amount of expense.
All plastic should be treated with a quality cleaner and protectant, and the carpets should be vacuumed to the point where you can actually see the lines the vacuum made. Get your detail shop a carpet rake, to really make the carpets look awesome.

Hidden garbage under the seats or in map pockets can cost you a sale. Make sure your detailers are looking everywhere and even vacuuming under the seats, trunk and map pockets.

Clean door jams make a real difference as well, have them wiped down and silicone the hinges.

Detail the engine and trunk, clean out their jams as well and be sure there are no signs of oil leaks whenever possible.

Freshen your Inventory often

cars with hoods openOne of the biggest mistakes dealers make is they don’t freshen their inventory weekly. I make it the lot person’s (porter/inventory managers) daily job. They should be flagging 2-5 cars a day to refresh.

Minor Modifications

Sometimes the smallest little details make your cars look so much better and in many cases add profit at a 2:1 ratio. When I was younger I made a living buying cheep cars with rips in the seats and dash boards. I would add seat covers and a minor patch kit for the cracks, then turn around and re-auction the car at a tremendous profit.
Simple things like spray painting the wheel wells black or silvering the end of an exhaust have amazing impact on curb appeal.

Adding Accessories

Some dealers like to add accessories, such as alarms. In my opinion the return is only equal to the value of the added item and in some cases lowers your SRP’s because it sometimes raises the price pass your competitors. Another side effect of adding the accessory in advance is you tend to give it away, instead of selling them at a profit

Minor Bodywork

Mobile paint technician’s are a used car manager’s best friend. These companies will come to your used car lot and can remove scratches and small dents without the hassle of taking your car to a repairer or body shop. They can also treat your car with an extra clear coat, giving the paint a new lease on life and providing added protection against chips and scratches.

When you have your own body shop you can fall into the trap of wanting to paint every minor dent. Dent removal without painting is the better way to go. Again its cost to profit ratio is as much a 4:1
Kevin Leigh, Dealer Simplified
Kevin Leigh

Story Book

One of the most important things you can do to increase the value of your cars is to keep a “story book” which includes such items as:

  • Printed Carfax
  • List of Work Already Preformed on the Car
  • Printed List of Reviews on the Car from Edmunds or Cars.com
  • Printed List of Standard and Added Options
  • Original Mileage statement
  • Warranties Available

Salespeople that show the storybook upfront are far more likely to get top dollar than salespeople that wait until the customer asks for the Carfax.

Categories
Retail Car Lot

What’s Your Strategy for Pricing Used Cars?

Pricing Used Cars

Pricing Used Cars for Your Retail Used Car Lot

Having the right pricing strategy is key to selling used cars in todays markets. Pricing used cars and re-pricing should be strongly based on your market and the online metrics SRP (search results page) and VDP (vehicle detail page) you are getting on your website or other search sites you are advertising with.  It has become a best practice to have every vehicle you select for retail advertised for sale starting at day one with a competitive “go-to market” price. This means competitively pricing your vehicles to the market to achieve quick turn at a fair profit.

VDP conversions

0% – 2%       underperforming vehicles
2.1%- 3.5%  avg. performing vehicles
3.6% +         high performing vehicles

How to pick the right pricing strategy for your store. Different dealers are looking for different results from their used car department. Some dealers are looking to increase market share, while other dealers are all about the money. Whether you are going for volume or gross, having a pricing strategy and using it consistently will help you achieve the results you are going for. Here are two examples;

To achieve a MAX TURN set your targets at:

Days                  Min %         Max %
0-10                 0%                    95%
11-20               0%                    90%
21-30               0%                    85%
31+                  0%                    80%

To achieve the MAX GROSS set your targets at:

Days                         Min%               Max%
0-30                 110%               150%
31-60               100%               125%
61-90                 90%                 100%

Once you have determined if going for max turn (high volume) or max gross (all the money), which will cause you to pass on the occasional deal, it is time to build your pricing strategy. Most strategies are based on the age of the car. As a vehicle ages we move the price down in an attempt to build interest in it. While having pricing targets tied to the age, can and does work you still have to watch the market when it comes to making pricing moves. It’s not just age that causes values of vehicles to drop, although it is a big factor things like MDS (market day supply) and seasonal change will affect the value of your cars.

Market day supply (MDS)

0-40      days, fast moving

41-80    days, average

81-100  days, slow moving

101+     days, very slow moving

 

The most important part of having a pricing strategy or implementing any procedure is laying out your expectations and then holding people accountable to the task. Setting a strategy for a used car manager to follow can be tricky, from time to time they may have to veer off the strategy if the data they are looking at tells them to price a car different from the targets. You may have set your targets to price all fresh cars at 110% to market, but if the market day supply is 150 you will never sell that car for 10% over the market average price. You may not even sell it at 100%. Or maybe you have a 30 day old car and your target is set at 85% to market (15% discount) but you are getting an avalanche of internet traffic (4.5% VDP) you may want to holdout on moving the price down to 85%. Try moving it a few hundred dollars and watch the traffic. Don’t give up gross if you don’t have to.

 

So you have picked your pricing strategy and set your targets now its time to outline your plan. If you need a little jump start here is a 70 day and out pricing plan.

Vehicles are looked at for re-pricing as they age. No vehicle should go longer than 7 days without a price change and should be changed by the Used Car Manager. It’s always a good idea to have the GM, as well as the other managers in your store participate in the pricing conversation. Set up a bullpen so you and your employees can look over fresh inventory before putting cars out on the lot. Have the go to market price at the bullpen so you can discuss it with the team.

0-15 day

The re-pricing of cars 0-15 day old should be done at 7 and 14 days. You will need to monitor the vehicle’s online performance with SRP and VDP metrics. Vehicles with a low conversion percentage or with low SRP counts will typically need a larger price adjustment to help them get some interest.

16-30 day

Vehicles are re-priced at 21 and 28 days. Under performing vehicles (0%-2% VDP) or vehicles with a higher days’ supply (over 81) are marked down in price more than vehicles performing at a high level (2.1% VDP or lower day supply). Try to position vehicles in the top 5 price point base on vehicle condition and miles to increase online traffic. Make sure all vehicles have marketable photos and a well written description that differentiates your vehicle from the competitions. Promote any maintenance or  recondition you have performed in that description.

31-45 day

Vehicles are re-priced at 35 and 42 days. These cars should be re-bull penned with sales consultants.  Used vehicle managers, inventory managers and sales managers need to review SRP and VDP counts as well as MDS – looking for underperforming and slow moving vehicles. Price changes at 42 days should be moved at or below 90% of the market and should be set in the top 3 price position. (Based on market size)

46-59 day

Vehicles are re-priced at 49 and 56 days. At this point, you should have an exit strategy depending on market days’ supply (MDS) and stocking levels of vehicle class. You may want to keep a vehicle with low VDP conversions if it is of like brand to your franchise, but make strong consideration to be price ranked #1 in your market. Use MMR (Manheim Market Report) to re-price your vehicle based on what this unit will draw at the auction.

60-69 days

Set the retail price at or close to what the car will draw at the auction. Its time to make this car go away and retail at any price usually makes more sense than taking a wholesale loss.

70 days and out

Time to rip the band-aid off and send it to the auction.

 

Hopefully you have been re-pricing and making good stocking decisions so you never have to send another car off to the slaughter.

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Categories
Dealer Software Defining Car Speak

What is a DMS – Dealer Management System?

Components of a Modern DMS

A dealership management system (DMS) or auto dealership accounting system is a bundled management information system created specifically for the automotive industry and especially for  car dealerships or large dealer groups.

Some DMS's are OutdatedDMS is not for everyone, typically small scale dealers and independent used car lots will manage their business with generic accounting packages. Even large dealer groups will outsource parts of the DMS to achieve higher quality products.

A typical example of outsourcing is inventory management. In most cases dealers are using companies like VAuto, VinSolutions or Dealer Simplified.

Another reason dealers are outsourcing is that many of the traditional DMS systems are outdated or the dealership cannot afford the massive upgrade charge. It is just less expensive to keep the basic accounting package from their DMS and bolt-on modern software such as CRM and Dealer Web Sites.

Dealers need software to support all aspects of running a dealership such as:

  • Tracking vehicle inventory
  • Tracking sales
  • Finance and insurance calculations
  • Dealer websites
  • Menu selling systems
  • Tracking
  • Accounting
  • CRM
  • Wholesale management
  • Internal company websites and message centers
  • Calculating employee commissions
  • Purchase order tracking
  • Parts inventory
  • Auction management
  • Work order management
  • Appointment scheduling
  • Proper planning
  • Follow-up

Most Common Dealer Management Systems found in dealerships today are ADP, Reynolds and Reynolds and Dealer Track. However many new DMS systems have arrived on the scene in the past few years and are offering easier integration and connectivity with software partners with modern API’s and SSL Keys.

# of Dealership using Non-DMS add-on's
Categories
Defining Car Speak Retail Car Lot

Define SRP

What is a SRP?

The Term; “SRP” stands for Search Results Page, a relatively new term in the industry. In the past, before the internet, all you had to worry about was how the front on your lot looked, did you open the hoods and blow up those balloons. Today, drive by traffic is still important, but if you truly want to grow your used car lot, you need to have a real understanding of SRP’s

SRP’s are how many times your car shows up in a search. Example on Autotrader, or even on Auction Simplified when you are trying to wholesale the car, your car must show up in searches results pages or it will never sell on-line. 
Kevin Leigh, Dealer Simplified
Kevin Leigh

Automotive SRP Yes or NoCars Not Showing On SRP’s:

When I speak to inventory managers at dealer groups, I tell them this: “If it does not show, it’ll never go.” And that is not too far from the truth. In the internet search dominated market, if your cars are priced to high or worse yet, you take to much time to get them online, they may as well be sent right to auction because they will age out.

Dave Kaiser our co-founder, wrote a great article about a pricing strategy he deployed at a large dealer group in Buffalo. In this article he talks about price changes at specific times to get the most possible SRP’s while retaining gross. [article on used car pricing]

The Main Question if you Want SRP’s:

The main question you should be asking is:  “Are my cars showing on page one of a search on cars.com autotrader.com etc, when the customer searches.” If not…. It should be a three alarm fire for your used car manager and inventory manager. Fix the problem quickly your your car will age.

One parting comment, even if the car is priced right, you still must have photos a great description and above all the equipment listed. I mean every time. Having missing photos in this day and age is a sin. Listing a car on line without a price is the cardinal sin. I have found only one exception to listing a car with no price; when you want the car to be bid on, using a tool like Car Auction Widget (available from us) but even then you need a starting price for it to be found on the SRP