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Garry House

The Changing Role of Used Vehicle Management


Over the last ten years, anyone who has not witnessed dramatic changes in the used vehicle arena must have his/her head in the sand. Why is it then that so many franchised new vehicle dealers have thus far failed to effectively adjust to these changes? So that you understand what I’m talking about, I’ll just mention two of these impactful changes:

1. The Growth of the Internet as a Marketing Source

2. The Advantages Available through Inventory Optimization Technology

Even the language is changing! The used vehicle manager who was successful ten years ago wouldn’t even be able to communicate today. What did he need to know about inventory turns, price-to-sale gap, SRPs and DVPs, etc.?

Most importantly, the scope of used vehicle management responsibilities has massively expanded. At the used vehicle management classes offered by the NCM Institute, we now define and discuss the 30 Regular Responsibilities that must be performed in a well-run pre-owned vehicle department.

NCM Institute divides these responsibilities into three major categories: Inventory Management, Marketing, and Sales Production. It quickly becomes apparent to our students that even Superman, working 80 hours per week, cannot effectively perform these responsibilities individually.

Many of these numerous tasks must be assumed by, or delegated to, other members of the dealership sales team. In some dealerships, the used vehicle department manager position has been totally eliminated from the organization chart. Instead, the position has been replaced by one or more of the following:

  • Group Used Vehicle Systems Coordinator
  • Used Vehicle Digital Marketing Director
  • Used Vehicle Sales Production Manager
  • Used Vehicle Inventory Manager
  • Used Vehicle Acquisition Specialist
  • Used Vehicle Pricing Administrator

Without a used vehicle department manager, either the GM (or GSM, if applicable) must “own” the aforementioned 30 Regular Responsibilities, and he/she must ensure that each of the responsibilities is effectively delegated and executed. Future articles of Up To Speed will present and discuss in detail many of these individual responsibilities.

Need help structuring your dealership to capitalize on used vehicle department opportunities?  Reach out to your NCM 20 Group moderator or Retail Operations Consulting coach, or sign up for the NCM Institute’s courses in Used Vehicle Management.  Call us at 866.756.2620; we’ll listen and recommend a solution that’s right for you.

UV Training

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Garry House

Combat is a Leadership Laboratory

US Flag

Combat is a leadership laboratory. That laboratory is a proving ground for veterans like Leif Babin, who shared his insights on leadership and teamwork at last Fall’s Driving Sales Executive Summit. A former Navy SEAL and co-founder of management consulting firm, Echelon Front, LLC, Babin gave an inspiring keynote address where he translated his experiences as a SEAL and SEAL Officer into leadership development tips.

This Independence Day, as we consider the significance of our Founding Fathers’ leadership, courage and dedication to freedom that so many have fought for over the decades, I thought it timely to revisit some of Babin’s insights, beginning with his fundamentals of leadership and teamwork:

  • Cover & Move – Teams must work together
  • Simple - Use clear, concise communication so everyone understands the specific mission
  • Prioritize & Execute – Get the team moving toward the highest priority target
  • Decentralized Command – Everyone knows what to do and why

Babin stressed that the key to effective leadership is for those in leadership positions to embrace three essential concepts:

Extreme Ownership

Leaders own the solution. Take responsibility when things go wrong and develop solutions to overcome problems.

Continuous, Realistic Self-Assessment

Humility and constant training and preparation are required if you want to improve. Set standards for your team: it’s not what you preach, it’s what you tolerate. Remember, there are no bad teams, only bad leaders.

Hard Training

Training must be continual, realistic and practical, stretching you beyond your comfort zone. Babin also stressed that the fundamentals don’t change, and that “advanced tactics” are the basics done really well. Finally, repetition is critical. In his words, “Train, train, then train some more.”

In my humble opinion, the U.S. Armed Forces are collectively the best, most respected military force in the world, and the SEAL program illustrates the discipline, training and leadership that make it so. I’m happy to take a lesson in leadership from them!

This July 4th, let’s celebrate the freedoms derived from those earliest declarations of independence and thank all the wise leaders and brave heroes who have sacrificed so much to maintain our liberty over the years. Happy Independence Day, America!


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Garry House

Are You of a Mind(set) to Grow?


Professor Carol Dweck of Stanford University believes humans have essentially two mindsets, growth or fixed, and through her research with employees of Fortune 500 companies, she found that managers with a growth mindset are more innovative.

Why is this important? According to the author,

“Growth mindset managers create better work environments. They are more open to feedback from employees (because they’re interested in learning); they are better mentors (because they believe in development); and they are perceived by their workers as more fair (because they believe everyone has the capacity to improve). Furthermore, those who have a growth mindset acquire the skills for success.” [Source]

It seems our mindsets dictate how we feel about ourselves and how we relate to situations, ideas and other people. For example, someone with a fixed mindset may believe his or her intelligence or talents are predetermined (or fixed) – you’ve either got brains and talent or you don’t. Those traits, therefore, are as good as they will ever be, so there’s no need spending time and energy developing them further. People with fixed mindsets are what we might consider “set in their ways.”  They think they’ve got it all figured out and any challenge to their way of thinking is a personal affront.

By contrast, people with growth mindsets believe that brains and talent are just the starting point; these folks believe their basic abilities can be improved with hard work and dedication. For this reason, they love to learn, are open to new ideas and perspectives, and they don’t let failure set them back; they learn from mistakes and capitalize on those lessons to find new and better ways of doing things.

Apparently, we can have different mindsets about different things: I may have a fixed mindset about my golf game, but I have a growth mindset about how I run a dealership. And, we have the capacity to change from a fixed to a growth mindset.

As you might imagine, we don’t see that many with fixed mindsets in our classes at the NCM Institute. Here we see managers and dealers who want to learn new skills and better processes so they can improve their performance and enjoy greater personal and professional success. It’s not difficult to spot the ones with fixed mindsets, though. They are usually either very quiet or a bit combative when we expose their way of doing things as less efficient or effective.

Want to know how to spot your dealership’s innovators? Find the employees and managers in your dealership who don’t try to cover up their mistakes, but use them as lessons for improvement. Chances are, those are the ones with growth mindsets.  Harness their drive and enthusiasm by giving them every opportunity to expand their knowledge and skills where it will benefit you both.

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Garry House

The True Cost of DIY Training

Businesspeople in Meeting

I read a whitepaper recently by The Training Associates comparing the cost of staff trainers to contract trainers. Because in the NCM Institute Manager Training Survey several respondents cited their use of staff trainers as to why they do not use outside training providers, I was eager to read what the paper would reveal. If your dealership uses staff trainers, or you are thinking about bringing on staff trainers, read on for some interesting insights that may have you thinking twice.

First, the white paper, “Staff & Contract Instructors: Costs, Comparisons, and Considerations for Strategic Decision Making,” is updated frequently and used “by many organizations as a tool for assessing their instructor (aka trainer) acquisition strategy – with an eye toward reducing training-related costs and risk.”

Second, the paper reminds the reader that total staff instructor’s salary must include all forms of monetary compensation, including direct and indirect overhead costs and that, as a percent of salary, total overhead costs range from 40 to 150 percent. In their example, the total cost for a $70,000 staff trainer can range from $105,000 to $175,000.

Then there is the discussion of low staff trainer utilization rates, with realistic utilization of the trainer at about 60%, but while interesting, this is not the eye opener. No, what is most revealing is the side-by-side “Factors & Considerations” table that illustrates a near hands-down recommendation for contract instructors over staff instructors. In the few areas where staff instructors have the apparent advantage (no cancellation charges; immediate availability; total company control; loyalty and commitment to the company), the contract trainers trump the in-house trainers hands-down in cost and profitability, broad training expertise, and no employee liabilities and risks.

So the next time you think you could do your training better or cheaper yourself, think again. The NCM Institute is a proven training provider with hundreds of client testimonials to verify our credentials and an annual training subscription with an ROI that can’t be beat! Give us a call when you’re ready to talk about all your training needs…on-site, regional, online or at our training headquarters.


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Garry House

Are Your Sales Department Pay Plans Properly Balanced?


More frequently than you might expect, one of our 20 group moderators, Retail Operations consultants, or NCM Institute faculty members gets tagged as an “industry expert.” It happened to me in the March 10th, 2014 issue of Automotive News in an article titled “What’s an F&I Pro Worth?” and authored by Jamie LeReau. Jamie’s commentary focused on F&I producer compensation and the fact that these folks now make more than sales managers and most other dealership managers (as reported by NADA for 2012). Since I have a reputation as being outspoken on this issue, Jamie called and asked for my opinion. Fortunately I wasn’t misquoted, and here’s essentially what I said:

“The typical F&I producer today sits in his office and waits for somebody to bring him something. A sales manager has to manage the activities of his sales team and deal with five potential customers before he closes one. There’s a lot more skill involved in becoming a successful sales manager than in becoming a successful F&I manager. F&I managers are overpaid, and sales managers are underpaid.

There needs to be a change in the balance. Pay plans have not changed with the times, especially now that consumers are researching vehicle prices on the Internet. Transparency in pricing is enabling consumers to negotiate cheaper car deals, resulting in thinner profit margins on car sales and lower commissions for salespeople. While pricing transparency is good, it can keep salespeople (and managers) from getting a ‘fair shake.’

We have not adjusted to transparency with our compensation plans. Our formulas are flawed. Dealerships struggle with how to tweak compensation formulas to make them more equitable. Most F&I managers are compensated based on a matrix percentage calculated from two factors: (1) their product penetration, meaning the number of F&I products they sell, excluding financing, against the number of people they see; and (2) the F&I dollars earned per retail vehicle sold at the dealership. Their compensation has typically been based on just the income that F&I produces.

Today, though, some dealerships are looking at blending the revenues of all departments on the variable side of the business ‒ new-car sales, used-car sales, and F&I ‒ and paying the managers of those departments a percentage of that blended number. These stores are trying to put everyone on the same pay line.” 

So why is there a compensation misalignment in so many of our sales departments? We need to look at how we got here in the first place, so let’s go back a few years and compare “then and now.” The following table, Two Months…20 Years Apart, will help explain why we’re where we are today.

Two Months… 20 Years Apart

Units & $PVR Metrics


Metric Category Descriptor 1994 2014
Combined New & Used Retail Unit Sales  150 150
Front Gross (Conventional) $1,275 $850
Net Financial Services Income $525 $1,025
Total Unadjusted Gross $1,800 $1,875
Total Unadjusted Gross $270,000 $281,250
Hard Packs (Reported in Other Income) $375 $175
Doc. Fees (Reported in Other Income) $195 $495
Mftr. Incentrives (Reported in Other Income) $0 $325
Total Gross in Other Income $570 $995
Total Gross in Other Income $85,500 $149,250
Total Adjusted Gross (“Super Gross”) $2,370 $2,870
Total Adjusted Gross (“Super Gross”) $355,500 $430,500


Personnel Metrics


Compensation Category Descriptor 1994 2014
Salesperson Count (Including BDC) 15 18
  Average Compensation $4,000 $4,000
  Total Compensation $60,000 $72,000
  % of Adjusted Gross (“Super Gross”) 16.88% 16.72%
F&I Producer Headcount 2 2
  Average Compensation $6,500 $12,000
  Total Compensation $13,000 $24,000
  % of Adjusted Gross (“Super Gross”) 3.66% 5.57%
Sales Management Headcount 3 3
  Average Compensation $10,000 $10,000
  Total Compensation $30,000 $30,000
  % of Adjusted Gross (“Super Gross”) 8.44% 6.97%
Total Variable Compensation $103,000 $126,000
  % of Adjusted Gross (“Super Gross”) 28.97% 29.27%

I would first like to draw your attention to lines #3 and #15 of the table. Back in 1994, the “$1,000 PVR Club” was only a wish or a dream for most F&I producers, and F&I product vendors and trainers were recommending that dealers pay their F&I producers 15% – 18% of Net Financial Services Income. Today many F&I producers are achieving $1,000+ PVRs, yet many dealers are still paying out 15% – 18% of Net F&I Income in compensation. Do these F&I producers today deserve nearly twice the compensation they earned in 1994? Are they twice as good as they were in 1994? Are they dealing with more customers per month? Do they have to work harder than they did in 1994?

I think you’ve probably answered “no” to these four questions! In fact, you may even be saying to yourself, “Wow, we’ve really even made the F&I producer’s job a lot easier over the last 20 years…improved processes, better technology, more product offerings, shortened deal cycle time, etc.”

From a compensation philosophy standpoint, my current preference is to pay all F&I producers and sales managers on the same pay line (probably line #9), with their individual percentages determined from an individual performance matrix. If you disagree with me, I’d like to know what you think!

If you agree with my overall philosophy and would like some help developing new pay plans for your variable operations team members, you might wish to attend the class on Sales and Management Compensation on April 3rd and 4th at the NCM Institute Center for Automotive Retail Excellence in Kansas City. If you would like additional information please click here, or call Brandiss, Cassie or Elisabeth at 866.756.2620. I’ll be teaching that class together with Mark Shackelford and we hope to see you there.


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Garry House

Compensation Philosophy

A Consultant’s Approach to Developing Sound Compensation Strategies for Dealership Managers and Sales People


There are today, and there probably always will be, as many different compensation plans as there are dealerships. That is the nature of our business: to be individualistic; to have a unique dealership culture reflected in the way we treat our customers and our employees. And management and sales pay plans are certainly a part of that unique culture.

To be effective, any dealership compensation plan must primarily focus on those areas for which the management or sales employee is accountable. The plan should provide motivation for the employee to continually achieve higher levels of individual or departmental productivity and profitability. And the plan must be fair to both the employee and the dealership under varying levels of operating performance.

Even the best-designed compensation plans sometimes result in an excessive departmen­tal compensation expense or in the manager or salesperson being paid too little…or both. However, when this happens, it is normally not the fault of the compensation plan itself; it is because the dealer principal fails to step up to the fact that current business conditions do not justify the current head count of managers and/or salespeople.

Businesses that contract with experienced professionals to evaluate and help plan how they should pay their people usually have happier employees and lower personnel costs. The Retail Operations division of NCM Associates, Inc. is one of the few automotive consulting firms which specializes in compensation planning and implementation. The following is a description of the methods we use to assist client-dealers in developing sound, results-oriented compensation programs for management and sales personnel.


The consultant must first gain an understanding of the dealer’s cur­rent compensation methods. Copies of compensation plans, together with the employees’ earnings history must be provided to the consultant. Additionally, the consultant needs to know how the various compensation categories relate to the dealership gross profit and expense structure. This information is gained from an analysis of past and current finan­cial statements and, if available, from future planning documents. The underlying focus of this preliminary phase is to clarify the dealer’s objectives. (Why is a change in compensation strategy desired?)

Definition of Consulting Engagement

The consultant prepares and submits a detailed “letter of engagement,” which establishes the parameters of the consulting project. This document includes, but is not necessarily limited to, (1) a statement of the project objec­tive(s); (2) a description of both the consultant’s and client’s responsibilities to the project; and (3) an estimate (by project item) of the engagement time, the associated consulting fees and expenses, and the completion date. One of the key statements in this letter is that both the consultant and the dealer agree to individually attempt to maximize the efficiencies of the consulting engagement so that the project is com­pleted on time, at or below estimated budget, without sacrificing the quality of the end product.

Determining and Forecasting Key Results Areas (KRA’s)

The consultant and dealer must identify and quantify each element for which the management or sales employee is totally accountable, and also those for which he/she is only partially accountable. The consultant then prepares a computerized planning model, depicting various performance scenarios involving the KRA’s. Using a “What If?” approach, the consultant assists the dealer in finalizing a Planned Performance Level (PPL). Where feasible, the respective manager or salesperson should participate in the develop­ment and finalization of his own PPL.

The final step in this phase is for the consultant and client-dealer to agree on individual and overall compensation philosophies and budgets. (What should this position cost? As a percent of gross? Per retail unit? In annual dollars? And what does this specific person expect, need, or deserve? Based on past performance? Based on past and current earning levels? Based on the competitive local labor market?)

Plan Development and Testing

Based on the decisions made in the previous phase (and building from the existing computer planning model), the consultant designs a compen­sation plan that attempts to match the dealer’s objectives at the Planned Perform­ance Level. This plan is then tested at numerous variances from the PPL. If necessary, the consultant modifies the plan so that it closely matches the client’s objectives over all possible performance scenarios. The consultant then provides the preliminary plan and test documents to the dealer for review. Frequently, further minor modification is required, accompanied by retesting and review. In some cases, the dealer may even negotiate this preliminary plan with the involved employee. The final planning and test documents are provided to the dealer to use for communication, implementation, and the permanent record file.

Plan Documentation

Depending on the client’s wishes, the consultant will, as an option, prepare a “long-form” compensation document for signatures of the employee and a senior manager. This document explains the compensation plan and the accountability philosophy in detail. Even if the dealer elects not to have the consultant perform this phase, it is strongly recommended that similar plan documentation be prepared in-house, executed, and filed for future reference.

Automated Plan Calculation and Presentation

The consultant will convert the computerized planning model into a “Plan Calculation and Presentation” tool using a pre-formatted Excel worksheet. With minimal operator input, this worksheet will (1) automatically calculate and present (for compensation communication purposes) current and prior performance and earnings by line item for a three month period; (2) project annualized earnings, assuming current month performance represents the monthly average; and (3) project annualized earnings pace, based on actual year-to-date earnings.


This phase involves assisting the dealer, as necessary and/or as requested, in communicating and validating departmental objectives and individual com­pensation plans. The consultant also has the responsibility to “load the lips” of the dealer, prior to “selling” the plan to the involved employee. Each dealer has his own attitude about the consultant’s role in implementation. Some like to keep the consultant “invisible” during the entire engagement period; these dealers are prepared to take full responsibility for the authorship of any new compensation plans, and thereby accept full credit (or criticism) if the change is well-accepted (or cursed). Other dealers prefer to feature the consultant as the catalyst of any change, making him very visible from the beginning of the engagement; this allows the dealer to always take, or negotiate, a fall-back position. (“The consultant did it. It’s not my fault, but I’ll fix it!”) And some dealers elect to make the consultant visible only on a selective basis, par­ticularly in critical situations.

NCM Retail Operations believes that, where feasible, compensation planning engagements should be conducted on an off-site basis, strictly by phone, FAX, Fed­eral Express and U.S. Postal Service. On-site consultations relating to compensation planning are normally expensive and inefficient. On-site consultations are justified only when third-party credibility is necessary to make a smoother transition from one com­pensation plan to another.

Follow-up and Fine-Tuning

“The best laid plans of mice and men…”

No, life doesn’t always (or maybe ever) work out the way we expect it to. The same is true with the best-designed compensation plans, once they are exposed to the dynamics of the real world retail automotive business. If the basic parameters are sound to begin with, they will remain sound. But the details of the plan may need to altered to accommodate unforeseen, and uncontrollable, circumstances.

The consultant acknowledges an ongoing responsibility to ensure that each compensation plan he recommends fulfills the needs of the employee, as perceived by the dealer, and provides operational and financial results compatible with the defined client-dealer objectives.

To get in touch with an NCM Retail Operations consultant about this topic, or to learn more about NCM’s consulting services for auto dealers, call 877.497.2363 or email


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Garry House

How Do You Increase Service Department Sales?

serviceThis is a pretty basic question, right? But when discussing this subject recently during 2014 Annual Business Planning conferences with several client dealership Service Managers, I discovered that the answers were far more elusive than they should have been. Most of the NCM client dealers continually try to achieve 5% – 8% year-over-year improvement in Fixed Operations profitability. And those that successfully do so fully understand that it doesn’t just happen. This level of increase requires detailed planning, clear definition and communication of expectations, and flawless execution of processes…or more simply stated, Accountability Management.

Improvements in departmental profitability require increased sales, or increased gross profit margins, or expense reductions…and sometimes all three together. Today I’m just going to talk about increasing Service Sales, and since the Service Manager has little control over Warranty Sales and Internal Sales, my focus will be on Customer-Paid Sales. At the NCMi management training classes, the faculty emphasizes that there are only three ways to increase Customer-Paid Labor Sales:

  1. Increase the number of customer-paid service transactions (Customer Repair Order Count)
  2. Increase the number of customer-paid hours sold per Repair Order
  3. Increase the customer-paid Effective Labor Rate (ELR)

Each of these three areas of potential improvement will be addressed in more detail during future articles. At this time it’s only important to understand the differences in the degree of difficulty for each strategy.

  • By far, the easiest initiative to undertake is increasing the customer-paid ELR. Although it may take a lot of research, combined with a significant period of trial and error, to develop the “perfect” customer-paid ELR, everyone in the industry agrees that it’s pretty simple to implement a price increase. Note: It’s very important to remember that there will be no additional parts sales      associated with this strategy.
  • Moving next up the ladder of difficulty is increasing the number of customer-paid hours sold per R.O. This initiative is process-driven and requires a high level of documentation, advisor and      technician training and counseling, and may be assisted by certain innovations in service department technology.
  • The hardest initiative to successfully implement is increasing the customer R.O. count. Although all manufacturers and most dealers are becoming more and more focused on customer retention, most service departments today are not adding new customers at a level commensurate with the level of defecting customers, and their resultant R.O. count is decreasing.

So why should we care so much, and concentrate so heavily, on increasing customer labor sales in our Service Departments? Because, as most Service Managers understand, a $1.00 increase in labor sales results in a $0.75 increase in labor gross profit! And, as most Service Managers don’t readily comprehend, when considering the associated sales of parts, tires, oil, and shop supplies, each $1.00 increase in customer labor sales (accomplished through strategies #1 and #2 above) results in a $1.10 to $1.25 increase in Fixed Gross Profit!

Next week, January 9th and 10th, NCMi will be conducting a 1½ day regional training program in Orlando Florida, titled How to Increase Customer Paid Gross Profit in YOUR Service Department. To learn more, click here. Enroll now if you want to Jump-Start your Service Department in 2014!


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Garry House

Are Some of Your Used Vehicle Deals Really “Special”?

specialsI have always believed that there was a very valid reason why dealership website designers decided to include a “Used Vehicle Specials (UVS)” page in their master plan. Because if I were a used vehicle prospect, cruising dealers’ websites, when I clicked on “Used Vehicles” (or “Pre-Owned Inventory”), and a drop-down appeared, with one of the choices being “Specials” (or “Featured Vehicles”), I would certainly go there first, before taking a deep dive into the overall used vehicle inventory. However, most dealership managers must not think that the normal used vehicle prospect is like me… If so, they’d pay more attention to their UVS page, if the dealer even still allows them the luxury of having one!

I’ve always encouraged my client-dealers to regularly maintain and update this particular web page. (And most of my clients know that when I use the term “regularly” in the used vehicle arena, I mean “daily.”) I also harp on my clients about letting the browsing internet prospect know WHY we say a vehicle is “Special.” Is it the price? Is it the scarcity? Is it distressed merchandise? Are we overstocked in this year/make/model? Our UVS page must clearly define and SCREAM what “Special” means for each vehicle listed.

Before taking the time to write this article, I decided to conduct some research. Although I accurately predicted the results of this brief study, I had sincerely hoped to be wrong. From my list of nearly 500 past and current client-dealer rooftops, I checked out 30 dealership websites… big dealers, small dealers, private mega-dealers, public cap dealers… and looked at their UVS pages. The sample size was statistically significant to me. Here’s what I learned:

  1. Only five of the dealerships (less than 20%) did, what I considered to be, at least an adequate job on their UVS page. The positive components on those pages included statements such as, “Must Go Now, Note the Huge Price Drop”, ”Lowest Price on Like Vehicles Within 500 Miles”, ”All Vehicles On This Page Eligible for Additional $500 Coupon Discount! Click Below”, ”Bad CarFax, Bad Paint, A/C Not Cold, Runs Like a Top, And Really, Really Cheap!”
  2. Three of the dealerships (10%) no longer had a UVS page. When I called the Dealer Operator (or GM), each said, in his/her own way, “I just couldn’t make it happen on a continuous basis. Poor accountability management on my part! So rather than have a ‘Bad’ UVS, I decided to eliminate it completely.”
  3. When I clicked on the UVS on six of the dealerships, the resulting message took a form similar to the following: “Look for great Used Car Sales coming soon!”, ”See all 82 vehicles in inventory.” or  “Sorry, no specials are available at this time. Please check back later!”
  4. The remaining 16 rooftops (more than 50%) had a myriad of different offerings on their UVSs, none of which were “Special.” A few examples: Copies of their display ads (one was unreadable)…a half dozen pictures with year/make/model, stock number, and price…a reproduction of their normal used vehicle listings with 25+ vehicles featured.

In which above category is your dealership? If you don’t know, check out your UVS page! I hope you won’t be disappointed. If your page is in category #1, congratulations! If not, I suggest you GET IT FIXED immediately! Next week, January 7th and 8th, NCMi will be conducting a 1½ day regional training program in Orlando Florida, titled How to Make the Phone Ring and the Door Swing in YOUR Used Vehicle Department. To learn more, click here. Enroll now if you want to Jump-Start your Used Vehicle Department in 2014!roadshow_orlando

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Garry House

If You’re Not In the “AS-IS” Used Vehicle Business, You Should Be!

asisHere’s your Statement of Strategy:

To provide incremental and additional sales and gross opportunities to the Used Vehi­cle department. This involves the sale of vehicles that normally would be wholesaled or disposed of at auction and ultimately end up on a Buy Here, Pay Here or “B” lot. They are older and higher mileage vehicles that dealers normally do not sell because of management’s fear of the customer “heat” normally encountered with the sale of these vehicles as a result of improper rep­resentation by management and the sales staff.

Here’s How You Execute the AS-IS Used Vehicle Sales Process:

  • Location – The location of these vehicles on your lot, in relationship to the rest of the used vehicle inventory that is for sale, is critical to the message that you give to your customers. These vehicles should be segregated from the rest of the inventory at all times.
  • Display Materials - These vehicles should be clearly identified “AS-IS,” with a competitive selling price, and very lit­tle price negotiation should occur on this type of merchandise. The price sticker should also clearly state the AS-IS condition of the vehicle being offered for sale.
  • Inspection - These vehicles should be inspected by the service department to determine if the vehicle is safe to offer for sale. It is a Pass/Fail inspection to protect the dealership from a liability situation vs. a total reconditioning process to make a vehicle front row ready.
  • Price Range - While any price range of AS-IS vehicles can and have been sold, gener­ally speaking, the ideal vehicles are those that can be sold for $7,500.00 or less. Do not underestimate the power of being able to advertise, “We have vehicles as low as $695.00.”
  • What do we tell the customer? That the vehicle is being offered for sale AS-IS. If the customer asks if the vehicle has been inspected, the answer is “No, but you are welcome to take it to a mechanic of your choice before purchasing it if you would like to.” If the customer continues to ask about condition or possible warranty, they should be stepped up to a vehicle in stock with a warranty.
  • Internal Identification - We suggest that the deal folders for AS-IS vehicles be color coded to reflect what they are. If you use a green folder or manila folder for your deals currently, use a blue or red folder for all AS-IS vehicles. The object is that we want everyone to be able to identify the type of sale (AS-IS) the vehicle represents. If the customer shows up in service two weeks after purchase and a service advisor pulls his file, he knows right away that the customer has no warranty. If a man­ager gets involved in a deal, he understands the condition of the sale right away, and the finance department understands that they cannot sell a warranty on the vehicle.
  • Customer Disclaimer - There should be a disclaimer of “non-warranty/as-is condition” signed by the customer at the time of sale in every deal. This should clearly state the condition of the sale of the vehicle and should be countersigned by a manager at the dealership with a copy given to the customer at time of delivery.
  • Success - The keys to success in selling AS-IS vehicles, and in capturing the gross we cur­rently allow our competitors to take from us, is in the training of the sales staff to prop­erly represent the vehicles for what they are, and in the manner in which we display the vehicles. If the above guidelines are followed and all parties involved understand the condi­tion of the sale (AS-IS) you will appreciate the additional and incremental units and gross that these vehicles represent without the traditional grief we commonly associate with these types of vehicle sales.

Understanding, implementing and executing the AS-IS Used Vehicle Sales Process is one of the in-depth subjects taught in Principles of Used Vehicle Management at the NCM Institute Center for Automotive Retail Excellence.


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Garry House

The Importance of the MPI-ASR Process

wrenchesBack in May of this year, I published a blog article focused on the difference between good and great automobile dealers and I promised to follow that up by discussing what we, at the NCM Institute Center for Automotive Retail Excellence, have learned about the differences between some of the good and great processes employed by these dealers. This is the second of those follow-up articles.

What is the MPI-ASR process? “MPI” is an acronym for Multi-Point Inspection. “ASR” is an acronym for Additional Service Recommendation or Additional Service Request. The two together make up The Process. By definition, an ASR is necessary work discovered by the technician, in his stall or on his lift, during the performance of a Multi-Point Inspection, which has nothing whatsoever to do with the customer’s primary concerns. It is therefore often referred to in the dealership as the technician up-sell process.

Most every experienced fixed ops director and service manager that we work with at NCMi recognizes and admits that a well-designed, habitually-performed, and flawlessly-executed MPI-ASR process will provide more fixed gross than any other available service department opportunity. One of the exercises in NCMi’s Principles of Service Management I class continually demonstrates that a well-managed MPI-ASR process in a 15-technician shop will produce an incremental net profit of at least $250,000 per year.

Both the good and great dealership fixed operations professionals understand the need for a sound MPI-ASR process, however, very few (only the “great” ones) know that their MPI-ASR activities must be continually trained, monitored, reinforced, and enhanced in order to avoid process evaporation.” Following are the 10 components of what the NCMi faculty believes to be a great MPI-ASR process.

  1. Ensuring that a sound MPI-ASR process is anchored within the culture of the service department. Strict adherence to the requirements of this process must become conditions of employment for service advisors, service technicians, service support personnel, and service management.
  2. Performing Multi-Point Inspections on 100% of the vehicles accessing the dealership service operations (including express service), beginning with the first service visit following vehicle delivery.
  3. Continually educating the customer as to the value of the Multi-Point Inspection process and consistently obtaining the customer’s permission to perform the MPI.
  4. Ensuring 100% documented feedback to the customer of the results of the Multi-Point Inspection, even if no out-of-line conditions were discovered.
  5. Conducting regular technician training sessions (a) on how to perform a “quality” MPI, (b) on understanding the standards relating to “within-line,” “marginal,” and “out-of-line” MPI line items, and (c) on clearly and effectively communicating the results of the MPI. Conducting regular service advisor training sessions on how to advise the customer of ASRs and on how to overcome objections in closing the sale of these ASRs.
  6. Based on valid industry data for vehicle age and mileage, defining and communicating expectations to technicians for:
    • Ratio of ASRs to MPIs
    • Number of Line Items per ASR
    • Number of Flat Rate Hours per ASR
  7. Based on valid industry data for sales effectiveness, defining and communicating expectations to service advisors for sales closing rate on ASR hours requested by technicians.
  8. Ensuring that there is a disciplined “second effort++” program to sell declined ASR work is employed, both with the customer when he/she is still in the dealership and/or after the customer has exited the dealership.
  9. Developing and implementing a system to measure and report the results of the MPI-ASR process on an accurate and timely basis. Without the availability of current procedural technology, this step is, without question, the most difficult and painful in the overall process.
  10. Installing and instilling a highly-visible score-boarding discipline to internally display, on a month-to-date basis, the most current MPI-ASR recommendation frequency and quantity by technician and sales results by service advisor.

And, yes, you guessed it! Within the NCMi Service Management training curriculum, we do teach the details of each of the above 10 MPI-ASR Process components.

Training Solutions for Service Managers sept oct

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