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Randy Fluharty

3 Ways the Service Drive Can Solve Your Pre-Owned Inventory Problem

Service Sales 2

How many times have you said, “I can’t find quality pre-owned vehicles and, when I do, I have to pay too much for them”? I’m sure it sounds familiar—we all know that gross starts from the moment we obtain a vehicle, either from trade, auction, wholesalers, rental companies, or any other means of purchase. Include various fees, and they reduce gross even more by the time we get the vehicle to our door.

After reviewing national dealership operational data, NCM has determined that, if done properly, 3-4% of your customer-pay repair orders should convert to either a new or used vehicle sale if you have a dedicated service drive procurement process. Dealerships most adept at doing this have a dedicated salesperson for the service lane with a unique pay plan to incentivize them, but you must have enough service customer-pay volume; otherwise, I would recommend a different approach. For example, if your dealership does 30 customer-pay repair orders a day, you have, on average, the ability to generate roughly one vehicle a day from your service lane; that’s 20+ sales, easily enough to support a person with help from others when things get busy. Of those sales, trades are involved most of the time, and you will keep a very high percentage of those transactions because most vehicles in the service department tend to be fewer than five years old and have been maintained, which helps in reducing reconditioning costs while adding to the gross. Plus, we likely have the vehicle’s history if we’ve already established a relationship with its owner; after all, they are in our service lane!

Your service department creates high-quality vehicles

In 2015, CarStory surveyed online pre-owned shoppers asking them to identify what things they wanted to know about a pre-owned vehicle. They reported 15 items; the top three were condition, accident history, and service history. When you acquire a vehicle off the service drive, you can easily attest to condition and service history, assuming the customer and vehicle have visited your service department regularly. When you consider the top three areas, the potential customer wants to know what are the “risk reducers.” They are already uneasy about potentially buying another person’s problem; however, vehicles maintained by a dealership are perceived as being of higher quality, as they have been repaired by technicians trained specifically for the brand and repairs have used parts designed specifically for that model while maintaining the highest engineering standards.

Identifying potential purchases during service appointments

A critical component of this approach is determining which customers are viable candidates; you are looking for owners in an equity position or near the end of their lease cycle. To do this, your service department or service BDC must have a robust daily appointment process that captures the information you need to determine if a customer is in equity, such as VIN and name. Here are my recommended three options for implementing a process at your dealership.

1. Use software

Look into the various software options and companies that drill into your service appointment function in your DMS and run the customer against your records to determine if the client is in an equity position, assuming you sold the vehicle. These tools will alert you if the customer is eligible for another vehicle based on equity and credit position with a relatively high level of certainty.

2. Review upcoming appointments

Another way to start—one that doesn’t require the same degree of investment—is to review tomorrow’s service appointments and identify vehicles that are between three and five years old. Then, have an F&I manager compare the customer’s information in your DMS to see if you sold the vehicle, and request that he or she evaluate its approximate equity or lease position. If you have an opportunity, determine a rough trade number for the customer and build a deal based on their last purchase or lease. Develop a script, and get started.

3. Evaluate on the service drive

A third option is to ask your service advisors to give you a heads up on expensive repair orders in the shop. Examine the vehicle and if you trade the car and keep it, give them the internal repair. If you wholesale it, pay them what the internal repair order would have paid them in commission since you probably sold a vehicle that you might not have sold anyway.

These are just three suggestions to get you started. Whatever method you choose, keep in mind the bottom line: Opportunities exist at your door every day, so why not take advantage of them?

Learn more about Randy Fluharty and how he and his NCM colleagues can help your dealership through 20 Groups and in-dealership consulting.

Permanent link to this article: http://blog.ncm20.com/2017/02/3-ways-the-service-drive-can-solve-your-pre-owned-inventory-problem/

Lindsey Quinn

Interview with Randy Fluharty: Why “Fundamentals” are the key to success

Mechanics with merchandiser checking products availibility

We asked Randy Fluharty, NCM Associates Performance Partner-OEM Lead, to take few minutes out of his schedule to talk to us about the new Fundamentals whitepaper series. He shared with us insights on their creation and explained why, no matter how experienced you are, going “back to the basics” is an important management skill.

Randy Fluharty - Headshot

NCM: Hi, Randy. Thanks for joining us. You’re a fairly new member to the NCM team, so can you tell us a little about yourself?

Randy Fluharty: Sure. I’ve spent almost 30 years in the automotive business, doing everything from aftermarket to working with OEMs in numerous divisions and positions. And I have retail GM/Executive Manager experience. I draw on this broad experience while helping my clients identify areas of improvement and formulate a plan to correct issues.

NCM: Are you going to NADA this year?

RF: Yes! I’m looking forward to spending time in the NCM booth. We’re offering mini-workshops—really, a sampling of what the NCM experience is like—and I’ll be hosting several of those. Attendees will get a free 3D-printed gift and their selection of the new Fundamentals volumes. They are hot off the presses and we’re having to keep a close eye on them—all the moderators and other consultants are stealing copies for their clients!

NCM: We better be sure to lock those down! Now, the Fundamentals series was a massive project and clearly an internal success. What makes the Fundamentals guides so important?

RF: They remind us to not forget the fundamentals of the business, which are tried and true practices.  Compare it to practicing scales in music or practicing blocking or tackling in football … no different.

NCM: How were the books written?

RF: We took best practices that had been verified by our best performing dealers and industry experts and compiled them into this easy reference series.

NCM: Are these books for newbies? What value does Fundamentals bring to the experienced automotive professional?

RF: Right. That’s the question I get,Don’t we already know this?” Here’s the thing, though, without the fundamentals, nothing else works quite right. And surely not consistently!

It’s that lack of consistency that really gets experienced managers and dealers in trouble. When stability is lacking, we lose the ability to accurately determine that nature of the problem. It can result in the wrong fix being applied.

NCM: Who in the dealership should read the Fundamentals series?

RF: Every GM and department manager—NCM client or not. Really, every automotive professional should have a set of these on their shelves.

NCM: What’s the most important thing a dealership can do with these books?

RF: Use the 800# to call me! Seriously, though, it’s very helpful to get an unfiltered, outside prospective on your department or business. I’ve found that most businesses think all is well until another set of eyes starts looking at things and comparing them to known best practices.

An outsider’s view creates the context and perspective that causes businesses to find all kinds of opportunities. Translation? That means dealers are losing dollars due to inefficient and inconsistent practices.

NCM: What’s the number one takeaway you get from each guide?

RF: Let’s see … okay, for the Used Vehicle guide, you should ask yourself: What do you own your inventory for and is it the right inventory? On the Service side, I think the book comes down to the concern that, if we sell the work, too many advisors are discounting the profit away. And, when it comes to Parts, the biggest take away is process. Process, process, process. You can’t avoid it!

NCM: So, what’s next? Any more books coming?

RF: Sure. F&I is in its final edits, and we’re thinking about a volume for New and CSI fundamentals. We’re open to suggestions, though, so people should let us know what books they’d like to see.

Well, there you have it: The new NCM Fundamentals series gives a clear breakdown of each dealership department and the strategies you need for success. You can download the free digital ebook versions here. To get a printed version, just sign up for one of our mini-sessions. Attendees will get a 3D-printed gift, thanks to our partners at Ultimaker, and their choice of a Fundamentals book. Visitors to our booth—3013C—at NADA may also enter to win a FREE drone.

Permanent link to this article: http://blog.ncm20.com/2016/03/8233/