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Tag Archive: Terry Wichmann

Terry Wichmann

From the 20 Group: How to Defend Your Used Vehicle Appraisal

NCM-CD-127

Editor’s Note: It’s clear that our readers found Terry’s last blog, My Favorite Wordtracks to Defend UV Gross Profit, an incredibly useful tool for their dealerships. We asked him what other defensive wordtracks he could share, and Terry came back with this excellent guide to making the most of your appraisal.

You, as the dealer principal or general manager, have two options when you feel that used vehicle gross profit per-vehicle-retail (PVR) is mediocre (or worse). You can yell at your sales managers to increase the gross profit PVR. Or you can determine if there is a Used Vehicle process which is “broken” or needs improvement. As yelling doesn’t accomplish much for long, I recommend that you consider your processes and fix them.

The four types of trade-ins

I have an NCM Retail Solutions client who likes to say that there are only four ways to take in a car: 1) steal the car; 2) take it in for the right money; 3) stretch to make a deal; or 4) bury yourselves in the trade-in.

During this conversation, let’s assume we are discussing trade-ins that we “took in for the right money” or “stretch a little bit to make a deal.”

Step One: Appraise the vehicle correctly

Many dealer principals or general managers believe that they make gross profit when buying the car. That is, the dealership makes its money when we trade for or purchase it, as opposed to when we retail it.  One of the factors in making gross profit when you ‘buy the car’ is determining if we appraise it correctly.

I imagine your sales managers mostly value trade-ins of your franchise accurately. You need to evaluate their performance on other franchises, too, to protect the appraisal. Here are some sample questions to get you started:

    • Do you think they correctly appraise trade-ins of other franchises accurately?
    • When it is necessary to replace the windshield on a luxury car, do you think they know which luxury car has the $300 windshield or the $3000 windshield (which includes cameras and sensors)?

Step Two: Understand the costs of misappraisal

If we appraise a trade-in or lease-return incorrectly, say by $500, we will probably make $500 (or so) less gross profit than if we caught it, assuming we took in the trade for the right money in the first place. So, it’s critical that you get the appraisal right.

Another of my NCM dealer-clients likes to include the line item “$300 hidden reconditioning” on the used vehicle appraisal form. This reminder helps his sales managers consider hidden problems that are often missed during an appraisal, such as the water pump, rear main seal, and other items we may not see or hear during the evaluation process.

Step Three: Replace negotiation with documentation

To solve the misappraisal problem, I recommend to my NCM clients that their fixed ops managers provide pricing to their sales managers for the forty or so most common maintenance items on their most frequently accepted models, based on the CP labor rate and 40% gross-%-sales for parts, which is cost plus 67%.

Once this menu is available, your salespeople—or, preferably, sales managers—can defend the appraisal to prospects by showing them the costs to repair these common maintenance items. It’s hard to argue against the costs in black and white. This approach of replacing negotiation with documentation was one of Dale Pollak’s philosophies when he defined used vehicle “velocity” by designing vAuto.

There’s so little room for negotiations nowadays, so you need to prepare to counter any objections while accurately appraising trade-ins and lease returns as a means to increase your dealership’s used vehicle gross profit PVR. With the right process in hand, you’ll see better results than yelling at your staff.

How does your dealership defend the appraisal? Tell us below. Have more dealership concerns? Meet with Terry or another NCM Consultant to identify opportunities for improvement in your store.

Permanent link to this article: http://blog.ncm20.com/2017/01/from-the-20-group-how-to-defend-your-used-vehicle-appraisal/

Terry Wichmann

My Favorite Sales Wordtracks to Defend UV Gross Profit

Thinking man

Used Vehicle sales continue to be a critical part of any dealership’s strategy.

Quarter after quarter, used vehicle sales continue to perform: in July 2016 alone, it’s estimated that more than 3.6 million units sold. But no matter how aggressively you promote used vehicles, your dealership won’t make the most profit unless your sales team is consistently and firmly defending the gross profit on each and every vehicle they sell. Saying this is easy, but it’s often difficult to effectively train sales staff to protect each vehicle’s profit, leading to diminishing returns on sales.

To help train your sales team, here’s my simple—but effective—wordtracks to protect the gross margin on UV sales. I’ve used them for years. And this is a tool I frequently recommend to my consulting clients.

Defend your used vehicle gross profit with these wordtracks

(In this example, the selling price of the car on the dealership website and “on the windshield” is $14,750.)

1. Use the first 30 seconds to introduce yourself and the dealership.

Here are my recommended wordtracks:

- “ Our dealership/dealer group has been in business for __ years because we treat our customers very well and we know that price is important when a customer purchases a car (or truck) …”

- “You may be aware that __ thousand customers purchased used cars and truck from our dealership/dealer group last year.”

2. Get the prospect back to the dealership after the demo.

After a demo ride with a prospect, the salesperson should instruct her to park the used vehicle near the entrance Service Department. As she gets out of the car, the salesperson should say “… let’s go back to my desk and I will show you what we found and fixed on this car/truck.”

3. Do a trial close.

If possible, walk the prospects into the showroom through the Service Department and comment, “This is where you will bring your car for oil changes and other maintenance ….” See how the customer reacts.

4. Demonstrate the vehicle’s value.

After the prospects are seated at the salesperson’s desk/table, you should say, “I will get the value folder for this car and show you what we found and fixed on this car.” The salesperson should review each item in the folder with the prospect and watch for their head to nod in agreement a “trial close.”

After the review, sales staff should summarize the folder: “…and that’s why we know the selling price…$14,750…on this ___ is a fair price.”

The prospect’s response will tell you the next moves. If she responds, “I’ll give you $13,500 for it right now,” the salesperson now knows that the prospect likes the car, but she is trying to get it for less. The salesperson’s job is now to defend the gross. (“$13,500” is not yet an offer; it is an indication that the prospect is willing to buy the car).

5. Defend the gross against price objections.

Connect the reconditioning to the current price. Your salesperson should explain, “If you had come to our dealership and purchased this car ‘as is’ before we completed all the repairs on it, we may have sold it to you for less than $14,750.”

Review the value folder again, paying particular attention to the clean Carfax and intern internal repair orders which reflect all the repairs which were performed “at our (internal) cost.”

Reinforce that these documented items are the reason “we know that $14,750 is a fair price.”

6. Protect gross profit from counter offers.

If the prospect counters with “We’ll pay $14,000 right now,” the salesperson should try to overcome the price objection without taking an offer to the Sales Manager.

Use one of the following scripts to protect the vehicles gross profit:

  1. “What financial formula did you use to determine that this car is worth only $14,000?  We price our used cars and trucks very competitively on the internet; that’s why we sell so many of them: __ thousand alone in 2015. If we didn’t price them competitively, people like you wouldn’t find them on the internet.”
  2. “I imagine you spent several hours on the internet searching for a car like this one; you drove __ miles to our dealership to see it so you must feel it’s a fair price.  No one drives __ miles to see a car if they feel the price is too high. But, I understand you don’t want to ‘pay too much’ for this car.  But I think you know that $14,750 is a fair price. So, that you can go home and tell your friends that you ‘got us down’ on the price, you can purchase the car for $14,700 and still go back and tell your friends that you ‘got us down’ on the price.”

At this point, if the prospect continues to offer less than $14,700, the salesperson should take the offer to the Sales Manager who should attempt to close at $14,700.

How does your dealership defend the gross? Tell us below. Have more dealership concerns? Meet with Terry or another NCM Consultant to identify opportunities for improvement in your store.

 

Permanent link to this article: http://blog.ncm20.com/2016/08/my-favorite-sales-wordtracks-to-defend-uv-gross-profit/

Terry Wichmann

Car Dealers: Are you Paranoid Enough to Survive?

gas

Andy Groves’ first business book was entitled, “Only the Paranoid Survive: How to Identify and Exploit the Crisis Points that Challenge Every Business.” The recent and relatively sudden decline in gasoline prices has me thinking about Mr. Groves’ theory, as what is great news for consumers and car dealers ironically often wreaks havoc on dealership profitability.

At NCM, our foundational service is peer-to-peer collaboration around dealership operating performance that results in profit improvement. We do this in our 20 Groups, our management training programs, and our in-dealership consulting programs where we can show how a dealer’s operation compares to his or her peers in the industry. But we also do this among our own internal retail experts using technologies that keep us connected, even though we are out in the “field” each and every day.

Last week, our internal teams here at NCM Associates were deliberating the impact of lower gas prices on the mix of cars and trucks the dealers will stock. Of course, the inventory mix almost always changes when gas prices decline noticeably and the demand for larger vehicles and trucks increases. At the same time, the manufacturers, who must keep their eye on their EPA numbers, are likely going to further incentivize small cars and pay for the additional incentives by increasing the price on SUVs and other so-called “gas-guzzlers.”  This is demand and supply economics complicated by regulation and it’s nothing new to car dealers.

But as a consultant to those same car dealers, my bigger concern is what happens in the used vehicle market when the price of gas declines noticeably.  Savvy dealers (maybe those who are a little more paranoid than the rest) know that they must pay close attention to their used vehicle inventories in light of this short-term reality by managing their trades and pricing with the more likely, long-term reality in mind.

So dealers, what will you do to ensure you don’t wake up to a used vehicle inventory of SUVs and full-size pickups if/when the next crisis hits and the price of gas zooms to $4/gallon or more? If you’re not keeping a close eye on your inventory mix now, you’d better get a handle it soon, or let the used vehicle “write-downs” begin.


About Terry Wichmann:

Master dealership financial management and learn proven variable and fixed operations processes and management best practices that will help you drive more strategic growth and profitability. Click here for details. 

Permanent link to this article: http://blog.ncm20.com/2014/12/car-dealers-are-you-paranoid-enough-to-survive/