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Tag Archive: used vehicle management

Lee Michaelson

From NCM’s 20 Groups: 10 Virtual Showroom Merchandising Tips to Maximize Sales


I’m sometimes shocked at how badly online listings for pre-owned vehicles are! The information provided is terrible, and the photos are even worse. Clearly, online listings are just an afterthought for far too many used vehicle departments.

Online listings sell your vehicles

Ignoring online listings is a huge mistake. Far too much evidence has amassed for there to be any confusion: Your customers are shopping online long before they ever step foot in a store.

If you still question this, I recommend reading this excellent case study from Think with Google right now that details the mobile and online car purchasing process. If you’re short on time, here’s an infographic from the article that sums it up nicely:


Demand Accountability Online

If you’re an NCM 20 Group member, you already know that accountability management is crucial for changing processes. After all, success is dependent on execution. Before you make any shifts in the used vehicle department, I want you to identify the following items:

  1. Who is responsible for each item?
  2. How should it happen? (Process)
  3. What are your expected results?
  4. Do you measure the activities and results?

Top 10 Virtual Merchandising Tips from My 20 Groups

Now onto the specifics. Here are the recommended merchandising changes that have come out of my NCM 20 Group meetings.

  1. Recognize that your virtual showroom is open 24/7 and should be merchandised as well as your physical inventory. (Remember: Customers will shop your inventory online long before coming into your store.)
  2. Create and implement a vehicle photography process for your digital showroom.
  3. As part of that process, mandate that someone immediately review uploaded photography on your website and on all web services to which you subscribe. You want to make sure that the photos look good and clearly promote the most important features of your vehicles.
  4. Establish a dedicated, properly lit photo area that is free of clutter to take your photos and videos in; consider a turntable for use in this area.
  5. Hire a professional photographer to train the staff members who will be responsible for photographing the vehicles.
  6. Upload stock photos as soon as the vehicle is traded-in/purchased or immediately following the Trade-Walk.
  7. Once the vehicle is reconditioned, produce at least 25 high-resolution photos and at least one video.
  8. Highlight high-value visible options, such as a sunroof, navigation system or optional wheels. Set up the photo array so that these immediately follow the first passenger side ¾-front-profile photo currently in use.
  9. While you should always show vehicle equipment accurately, consider using Photoshop or similar editing software to accen­tuate “focus” vehicles.
  10.  Remember that the process doesn’t end! Continuously review the uploaded photos on all inventory sites your dealership uses.

Lee offers consulting services and is a moderator in many NCM 20 Groups. Membership not only gives you access to our monthly composite and industry-leading but lets you work with other successful peers to brainstorm solutions to the specific problems you face in your dealership. We’re currently accepting applicants to many 20 Groups—including Independent 20 Groups. Discover which NCM 20 Groups is the perfect one for you and sign up to attend a meeting! 

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Steve Emery

Are You Really Managing Your Used Cars?


For most dealers, the used car department is the biggest opportunity for increasing profitability. Unlike new cars, a dealer can stock any used car they choose. Most volume and gross issues are directly related to those choices and how the inventory is managed through final sale. No doubt, there is an “art” to managing used cars, and dealers who are getting the best results have added some “science” to it. This enables them to be proactive vs. reactive in managing their inventory.

What is the best Inventory for you to stock?

Do you know what have been fast-turning cars at your store? There are a variety of software tools that can look at your sales history and identify these for you. Any retailer knows this, down to the color, options, price point, etc. Once you know what these cars are, you can develop a core inventory. These are the cars that you want to make up the bulk of your inventory. They probably aren’t the ones you are currently buying by the truckload from the factory auction, so the majority of your inventory could be in slower-turning units, reducing volume and gross. Is your buyer guessing or knowing with your 7-figure checkbook? Proactive dealers use their core inventory as a shopping list for their buyers and track what percent of those units make up their current stock (goal 80%).

What are the best sources for these units?

Core inventory tends not to be auction program cars. Proactive dealers use these methods to increase their percent of core inventory:

  • Check the back door. Are you currently wholesaling core inventory?
  • These units come to you every day; just look at the Service drive! Many dealers spiff Service Advisors for letting them know core inventory is in for Service today. Managers do an appraisal and contact the customer.
  • Use direct mail to target current customers who drive core inventory. Invite them in for a special sale or service offer.
  • Who has the bigger house, you or your wholesaler? Develop a network of other dealerships you will buy from. Their non-core inventory could be your core inventory.

How can you improve recon time, cost and quality?

It makes no sense to buy great cars just to have them take forever in recon and come out in less-than-saleable condition. To proactively manage recon, many dealers have incorporated these processes:

  • When buying a car, fill out a 2-part recon pre-approval sheet. Check off what you already know the unit needs and set a dollar limit so Service isn’t held up waiting for approval. Place a copy in a dated folder 3-5 days out; review the folder every day looking for cars bottlenecked in the recon process.
  • Have ready cars pulled up to the front. Compare the approved recon with the actual RO for cost. Have someone in Sales test drive the car to ensure it’s in saleable condition. If the cost and quality are right, then close the RO.

How can we do a better job managing aging inventory and wholesale?

We all know that grosses tend to decline with the age of the car. Do you proactively manage units as they age to increase their chances for retail sale and avoid wholesale loss? When is a unit considered “old” to you? If 60 days is your turn policy, when do you take a look at the car? Answer: typically 45 days. Numerous studies have shown the highest gross peaking at 21 days. Proactive dealers are looking at aging units at 21, 42, and 63 days:

  • At 21 days, check the car for defects, re-clean, and park in the “hot spot.” Consider identifying the car as a “manager’s special,” spiffing it, reducing price, wholesaling it.
  • At 42 days, can we wholesale the car now? Put it on eBay? Trade with another dealer? Park in a “clearance zone” on the lot?
  • At 63 days, take it to the best place for wholesale. Depending on the unit, this may be a wholesaler, another dealer, or as a last option, auction.

None of these techniques are expensive to implement, especially when compared to what you may be losing in units, gross, and wholesale. Proactive dealers are managing their core inventory, taking their used car department to the next level of profitability.

For questions, reach out to $teve at 913-645-2915 or

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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.

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Paul Stowe

Check Your Used Vehicle Manager’s Thinking… Then Have a Conversation


Mr./Ms. Dealer:

There continues to be a great deal of misconception in sales managers’ thinking about why they’re not able to increase used vehicle volume. Industry metrics confirm that those dealers not performing at a minimum 1-to-1 New-to-Used retail sales ratio are just not participating in the opportunities of the current market.

So why do our managers continue to have these misconceptions? What follows are some common reasons we hear during our dealership consulting engagements. My responses should help you combat these misunderstandings that are prevalent in our industry today, and they’ll also help you have the conversation that will turn this thinking around.

“I need more inventory to sell more cars.”

You might, but first, do you understand and practice an aggressive “turn” mentality? If not, you are five years behind in your skill set. If you have an aging issue right now – why? Should your dealer give you more dollars to invest unwisely? Just a hint… great operators do believe a 30-day (or faster) turn is attainable. Our Benchmark metrics validate that a 45-day turn is very common, regardless of franchise. Do you understand that if you turn your inventory more efficiently, your volume will increase?

“I cannot find the ‘right cars’ and when I do, they are too expensive.”

Come on! The vehicles are out there! You might have to work every day to source them. What makes you think you are smarter than the market which dictates the cost and sales price of inventory? What is your acquisition plan? What do you buy each week to inventory?

“If I price to market, my grosses are too low.”

This is so common. Question: Have you ever put more money into a trade to make a new car deal? If so, of course you reduced the new car gross – right? If not, what have you just done to the integrity of your pricing model and your used unit gross potential? (Most OEM incentive money is being paid on new car sales. Why in the world would you destroy your acquisition disciplines, bumping used trade-in inventory values and not reduce new car gross to its true transaction value?)

A new car deal is a new car deal, albeit an OEM incentivized transaction. A used vehicle trade acquisition is an investment decision. Buy it right or understand the impact on potential grosses, salability, and aging of your used vehicle dollar investment; in other words, your true return on investment of your dollars, Mr./Ms. Dealer.

Have the conversation.

Understand and clear the air on these misconceptions, if they apply. Ask your manager to give you a plan to increase used unit volume profitably beginning right now. Get it in writing. There is too much missed profit opportunity, let alone the impact of adding new customers to your owner base.

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Dale Pollak

Two Reasons Used Vehicles will Guide New Vehicle Inventory Management

car_iconI have a prediction: Over the next three years, the way dealers manage, merchandise and price their new vehicle inventories will be dramatically different than how they’re handled today. In fact, I’d argue that the best practices we see today in used vehicles will serve as a guide for new vehicle departments.

This prediction comes from observing the growing effects of two important trends:

The Rise of Market Transparency

In used vehicles, this transparency has led to a more open-book and rationale approach to merchandising and pricing used vehicles. Dealers know they won’t attract buyers if they don’t apply attention, resources and time to presenting each vehicle online in a manner that fully and professionally details its value proposition. This trend has given rise to custom vehicle descriptions and photographs, and market-based pricing, often using tools that measure and mine competitive sets of available vehicles to determine each vehicle’s “sweet spot” in the market.

To be sure, a key reason dealers have embraced transparency in used vehicles comes out of necessity—used vehicle buyers are keen to avoid purchasing “somebody else’s troubles” and, perhaps more importantly, they want a fair deal.

By contrast, there’s still a cloud, if not a shroud, over the transparent merchandising and pricing of new vehicles. Most dealers (80% by some estimates) do not offer custom descriptions and photos when they post new vehicles online. Likewise, it’s a slim minority of dealers who offer more than Manufacturer’s Suggested Retail Prices (MSRP) or “call for details” pricing information in their online listings for new vehicles.

Indeed, the complexity of new vehicle transactions—with multiple configurations of down payments, incentives and other factors possible with nearly every buyer—makes it difficult for dealers to embrace a greater degree of transparency online. However, the incoming generation of buyers wants more, not less, transparency from dealers, a factor that will force them to venture into merchandising and pricing terrain they’ve already traversed in their used vehicle departments.

The Availability of Market Data

The advent of technology and tools that mine local market data has transformed the used vehicle operations at many dealerships. The “golden gut” is gone, replaced by the art and science of analyzing market data and metrics to guide decisions about the cars a dealership should acquire, and how these vehicles should be merchandised, positioned and priced online to maximize their appeal to potential buyers. Many dealers have learned to trust market data as they manage their used vehicle inventories, and they’ve found it to be a recipe for success.

But I think it’s fair to say that market data plays a far less significant role as dealers manage their new vehicle inventories.

When dealers order new vehicles from factories, they are often guessing about the vehicles and configurations that will play best in their local market. On top of that, there’s frequently pressure from factory reps to order specific cars, which results in dealers taking inventory to serve factory interests more than the dealership or its customers.

As these vehicles arrive at the dealership, market data often plays only a small role in the subsequent decisions for merchandising and pricing these cars—a factor that partially explains the current lack of transparency noted above. “I’d use that kind of data all day long if I had it at my fingertips,” a Detroit-area dealer told me.

Therein lies the current rub—dealers want the data to better manage their new vehicle inventories but it isn’t readily available.

That’s why I’m confident with my prediction. Over time, every market need gets filled. And it’s no stretch to imagine a day in the near future when the need for transparency and the availability of market data converge, giving dealers the ability to take a more market-focused, customer-satisfying approach to managing their new vehicle inventories.

From there, it’ll really just be a matter of adoption and implementation. The good news? Dealers who have undertaken transparent, market-focused processes in their used vehicle operations will have a leg up on dealers who haven’t.


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Robin Cunningham

Do You Know the ROI on Each Used Vehicle You Sell?

woman in front of cars

Most of us grew up in the industry where PUVR (or Per Used Vehicle Retail) was the key metric we were looking at to determine how successful we were on each vehicle we sold. As we all know, things have definitely changed since the Internet has become the primary way our customers begin their search for a used car.

For the last several years, I have had the privilege of teaching and coaching automotive dealership managers at the NCM Institute. Of all the great work we have the opportunity to do, there is nothing quite as satisfying as seeing the look on those used vehicle managers’ faces, often accompanied by their GM or GSM, about how money is actually made in the used vehicle department in today’s market.

Inside the classroom…

As in every class, we begin with accountability management and leadership opportunities. Then we examine the dealership’s profit opportunities, using a 20 Group composite and the Profit Trend Analysis. We look to see if the dealership is profitable or not; whether it has sold more or less vehicles year over year; whether its PVR is greater or less year over year; and then, whether the all-important total departmental gross profit is greater or less year over year.

We work through a number of spreadsheets using their own dealerships’ numbers to calculate their dollar day and unit day supply of inventory. We show them that their dollar and unit day’s supply need to be very similar, meaning they are selling what they are stocking. Day’s supply, ideally, is between 35-39 days. What we typically see is dollar day’s supply is higher than their unit day’s supply, meaning the lower cost of sale inventory dollars and units are turning faster, leaving the higher cost of sale inventory dollars and units to turn slower and becoming the root cause of aging issues. Then we calculate the turn rate of their inventories. As stated above, a 35-39 day’s supply or lower is what the best operators are achieving, which is 10-12 times turn per year. What we typically see in our classes is a 60 day’s supply, or a turn rate of 6 times per year. This is why aging issues are so pervasive in most used vehicle departments.

Next we calculate a number almost no one takes into consideration: Daily Holding Cost or Opportunity Cost. This is the cost the dealership has for each vehicle in stock, each and every day. This is done by taking the YTD total used vehicle departmental expense, subtracting the variable selling expenses (Sales, Sales Management, and F&I Comp/Policy/Delivery Expense), then dividing that number by the number of month’s data they are working with. We then multiply their average amount of retail units per month by a factor of 1.33, which gives them the equivalent of a 40 day’s supply of vehicles. That number is divided by the amount of days the used vehicle department is open for business, equaling the one day cost to carry each vehicle.

Make the numbers work for you.

The look on most managers’ faces at this point is priceless. We have seen some holding cost numbers as low as $19 per day and as high as $57 per day, with the average around $27-$35. Many managers initially believe lowering this number is the first thing they need to do. We tell them, assuming that all used vehicle departmental expenses are in line, the most important takeaway is to know this cost exists per day, per vehicle.

So what does this have to do with Return on Investment (ROI) on each vehicle sold? In order to know that, we first need to know the net profit on each vehicle sold. Take the gross profit of each deal and subtract the daily holding cost, then multiply by the amount of days to sell the vehicle. This is where our students begin to see that the amount of days we take to sell a vehicle has more affect on the net profit than the amount of the vehicle’s gross profit.


deal net profit ÷ cost of sale x 360 ÷ days to sell = ROI

EXAMPLE: $2,000 (deal net profit) divided by $12,000 (cost of sale) multiplied by 360 divided by 22 (days to sell) = 272% ROI. In class, to further prove the point, we experiment with changing the deal net profit up or down slightly to see the affect on the ROI. (Hint: it’s not much) Then we change the days to sell to better match their average turn rates, like 60+ days, and here is what we see. $2,200 ÷ $12,000 x 360 ÷ 60 = 1% ROI. The deal net profit was the same, but we took 60 days instead of 22 to sell. Sound familiar? Do your grosses or deal net hold up when you sell a vehicle at 60 days? Usually, not. Are you also possibly paying big SPIFFs at that late date?

Now you know why ROI on each vehicle retail is more important than gross per vehicle retailed. Also, the days we take to sell them is more important than focusing on front end gross alone. I often tell these managers, as they are about to head home, “Go back and say, ‘Boss, I now know what my most important job is…to get the highest ROI on each vehicle we retail.’” This is perhaps the most important concept these managers learn, and it will make all the difference in the success of their used vehicle department profitability.

There are so many other pieces to the puzzle to ensure profitability. Put it all together with structured Used Vehicle Management training through the NCM Institute.

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