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Tag Archive: Used Vehicle

Tom Hopkins

Diagnosing Your Clients’ Needs


When people think about making a vehicle purchase, they aren’t likely to compare talking with you to going to the doctor, but you should make that comparison when preparing to talk with clients. People trust doctors. They usually accept the diagnosis and prescription for wellness with few questions asked. That’s because they recognize doctors as experts in their fields. Your goal is to have your clients see you the same way. When they have an ache or pain related to their mode of transportation, they should immediately think of calling you. That’s because they’ll be confident you have the right prescription for their ailment.

To earn this level of respect and trust, you need to start every relationship with the right skills. These skills include a caring manner, a confident air, and your diagnostic tools. The tools you use in diagnosing the automotive needs of your clients may be as simple as a pad of paper and your product knowledge. They may include your past client experiences, personal experiences, or memories.

The most powerful diagnostic tools used by all people in sales are questions. Like a doctor, your use of questions begins with general areas of need. Then, based on the answers you are given, you narrow your questions down to where you can readily determine the right cure or solution for the clients’ needs.

Average car salespeople have this fantasy in which they think they should be able to simply present the wonderful features of their vehicles and the customer, seeing the value, says, “I’ll take it.” If customers made buying decisions based on features alone, that might work, but it’s a rare occasion when that happens.

The reality of it is that most buying decisions are based on past experiences, the experiences of others the client trusts, advertising, gut feelings, and hundreds of other factors that you can’t do much about. So, you have to start with questions to get them talking about their needs, wants, and perceptions of your product or service. The answers to these questions will help you put yourself in their shoes. Once you’re there, you’ll see what steps you need to take in order to help them make a sound buying decision.

Be sure to ask, “What past experience do you have with this type of vehicle?” It could be that they’re very well-versed on the features of an SUV or luxury sedan, even owned one in the past, and are seeking a new one of the same type. If they know little or nothing about the vehicle they’ve come to see, you’ll have to invest a bit more time in educating them as to the features and what they can expect.

Ask very specifically what they hope to accomplish with an investment in this particular type of vehicle. It could be that one of your vehicle’s key benefits is sought after by most clients. However, that feature does nothing for this particular client. You won’t want to turn them off by talking about something that doesn’t matter to them.

I like to use the analogy of a torpedo when talking about this subject. A torpedo leaves a ship in the general direction of its intended target. It bounces a signal off in the target direction. If the signal doesn’t come back, it corrects its direction to get back on course and sends another signal seeking feedback.

That’s what questioning does for you. You take off in a general direction with your questions. The answers you receive either tell you that you’re on target or that you need to take another track. Rarely will you take a direct course from initial contact to the vehicle sale. More often than not, you’ll find yourself zig-zagging but all the while heading in the general direction of the sale until you find just the right answer for each and every client.

Take a moment to think about the quality of the questions you are asking. How quickly and accurately are they bringing you back the information you need to move forward with a sale? If you continually get hung up in one aspect of your presentation, invest some non-client time writing out the questions you’re using now. Then, think about how you could rephrase them to get better feedback. An even better strategy is to make a list of all the information you need to have before asking for a decision. Then, work backwards, writing out the questions that will provide those answers. Either way, you’ll soon find yourself with better questions to ask, and a shorter, more efficient sales process.

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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.

UV Training

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Joe Basil

What’s the P/E Ratio of Your Management Team?


In any industry, top-performing management measures, tracks and makes decisions based on key performance indicators and metrics. In the auto industry we tend to focus on market share, unit volume, gross per unit, net profit as a percentage of gross, and so on. Typically auto industry metrics and key performance indicators are focused on volume and profitability efficiencies.

Over the last six to seven years, as technology has advanced and influenced a shift in consumer behavior, there has been a shift in dealer focus to measuring and tracking return on investment. Dale Pollak, the founder and CEO of vAuto, has been consistently bringing a different perspective to the used car business. This perspective is to measure and track your used car operation’s return on investment as opposed to volume and net profit.

So you might be asking what does this have to do with the price earnings ratio of my management team?

Well, as anyone in the industry well knows, the cost of entry and capitalizing an auto dealership today is enormous. We now have publicly-traded companies in the retail automobile business and if you’ve read any financial reports on those companies, they track and measure return on investment in most of their profit centers. They have brought a different perspective to the auto industry.

When you’re considering investing in a publicly-traded company, a key metric that is always quoted is the price-to-earnings ratio. If you are in the merger and acquisition business, you’d be looking at an earnings multiple to establish a business enterprise value. The inverse of that would be to look at the return on investment per year.

Let’s take a look at the price-to-earnings ratio, or the return on investment per year of a department manager in your dealership. For sake of discussion, let’s assume that a department in your dealership generated an annual departmental net profit of $500,000. Let’s further assume that the manager’s annual compensation for that department amounted to $150,000. From a return on investment or “multiple,” the manager generated a 3.3 return on investment ($500,000 divided by $150,000 equals of 3.3 multiple). You invested $150,000 in compensation and generated a return of $500,000.

Let’s take another example. Just for comparison, we’ll assume an annual departmental net profit of $1,000,000 and annual manager’s compensation of $200,000, and we’ll use the same formula ($1,000,000 divided by $200,000 equals a 5 x multiple). In this case, you invested $200,000 in compensation and generated a return of $1,000,000.  Obviously from an ROI multiple perspective, the $200,000 manager is a better investment than the lower-priced $150,000 manager.

The question is, if you evaluated each one of your departments and managers from a return on investment perspective, what level of multiples is your management compensation generating for you?


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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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Lycia Jedlicki

Two Simple Steps to Customer “Royalty”

crownWhen are we going to start treating the pre-owned vehicle customer like royalty instead of the “red-headed step child”?

When a customer takes delivery of a new vehicle, we try to make sure we do everything possible to ensure they come back to our service department (at least for the first visit). We may do this by giving them their first service free or scheduling their first service appointment. Why do we do this? Hopefully because we want to retain that customer and not just to keep the manufacturer happy!

What would happen if we treated ALL of our pre-owned vehicle customers like new vehicle customers, not just our certified pre-owed, but every pre-owned we retailed?

I have a dealer in one of my NCM 20 Groups that did just that! Guess what happened? Her service department gross profit increased 69% (yes, she was already profitable). Her customer pay repair orders increased 8.9% and her customer pay hours increased 42%.

What did she do differently?

  1. On every pre-owned vehicle sold, a one-year, 15,000-mile maintenance package was included ‒ the only exclusions were luxury high-end vehicles ‒ there were no mileage or age limitations.
  2. They also slowed their process down so the service advisor actually had time to build a relationship with a customer and had time to sell.

According to DMEautomotive Research increasing service intervals have cost the average dealership $91,000 in annual revenue, so why not retain the customer we already have? This includes servicing all makes and models; after all, you don’t want them getting treated better by your competitor do you?

The pre-owned vehicle customer (owner) is one we already have; wouldn’t it make more sense to try to retain them instead of spending money to try to find a new customer? Try giving them the royal treatment then watch your metrics for loyal soar!

UV Training


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Dale Pollak

Dissecting the Two Different Types of Used Vehicle Retailers

used carsIn my conversations and travels, I encounter two different types of dealers.

The first group often struggles with aged units in their used vehicle inventories, persistent wholesale losses and an as-yet unfulfilled desire to increase their sales volumes and overall profitability.

The second group has what I might describe as “higher-order” issues: To be sure, they encounter occasional aged units and wholesale losses, but these aren’t persistent problems. Their biggest challenges relate to fine-tuning and managing processes to help them increase efficiencies, lower costs and maintain improved sales volumes.

In the past several months, I’ve been trying to better understand this disparity: What, exactly, separates these two groups of dealers? Why does one group seem bogged down with aged cars and wholesale losses, while the other appears to have largely found a way to avoid these problems?

I think I’ve found the simplest answer to these questions. The difference between the two groups of dealers boils down to a willingness to own up to mistakes, address them and move on. Put another way, one group of dealers is more willing to take a loss on a used vehicle, while the other resists a potential loss at every turn.

This realization hit home the other day after two distinctly different dealer conversations.

In the first discussion, I was talking to a Midwest dealer with nearly a quarter of his 150-car inventory at or beyond 90 days of age. He’d stocked up this past spring and was trying to “retail out of the problem.” We looked closer and saw that he hadn’t made the pricing adjustments that appeared necessary to actually sell the cars. Why? Because he’d take a loss. Likewise, he didn’t want to wholesale them because “I’d lose my shirt at the auction.”

The second conversation with a Florida dealer revealed a different problem. He wanted my guidance on ways to find more cars more quickly to feed his inventory. He’s got an aggressive 25-day retail window, and turns his 120-car inventory more than 15 times a year. We discussed ways he could expand his reach at auctions and tighten up his trade-in appraisal efforts.

Then I asked how he felt about taking a loss on a vehicle. “I view every loss as two opportunities,” he said. “First, it’s a chance to re-invest my money in a car with a better profit upside. Second, it’s an opportunity for us to figure out what we missed.”

Wow, I thought. This dealer’s definitely a “new school” used vehicle retailer. Unlike his more tradition-minded peers, he’s evolved beyond holding onto cars and hoping for a profit-positive deal. He recognizes losses for what they are — a failure in his team’s efforts to acquire, recondition, price and merchandise a used vehicle, and an opportunity to make his next used vehicle investment decision even better.

Both conversations crystallized my conclusion about the difference between the two types of dealers.

I asked the Florida dealer for three tips to help other dealers adopt some of his “new school” used vehicle management thinking. Here they are:

  1. Recognize the time-sensitive nature of your investment. This dealer’s decision to retail every used vehicle in 25 days is no accident. Previously, his retailing timeline ran 90 days, then 60 days and then 45 days. The dealer settled on 25 days to essentially retail fresh cars all the time. My recommendation for most dealers is a 45-day horizon to retail used vehicles. The dealer’s more aggressive because he believes the shorter window minimizes his exposure to market risks — the mark of a retailer who understands the fast-changing nature of today’s market.
  2. Apply a disciplined, “retail-first” strategy. The dealer doesn’t wholesale too many vehicles, given the store’s “retail-first” strategy. This approach requires disciplined pricing decisions that balance each car’s potential for gross profit against its shelf life as a retail unit. The dealer’s team monitors each vehicle’s online performance against the market of competing cars to calibrate pricing.
  3. Adopt a “total gross” mindset. Part of the reason the Florida dealer is willing to take an occasional loss is that he understands he’s already made money on the unit through reconditioning, and he believes the next car will deliver a greater amount of both back-end and front-end gross profit. Like many velocity dealers, his focus on “total gross” followed years of using “average front-end gross” as his chief management benchmark. “Front-end gross doesn’t give you the whole picture of each car’s value as an investment,” the dealer says. “Total gross is better barometer.”

I shared the Florida dealer’s tips with the Midwest dealer. His comment: “I’m glad that guy’s not in my market. He’d be eating my lunch.”

UV Training

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Garry House

The Used Vehicle Age Management Process

bucketsLast month I published a blog 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 first of those follow-up articles.

Most every dealership manager that we work with at NCMi recognizes and admits that the greatest challenge they face in their used vehicle department is aging. Both the good and great used vehicle merchants understand the need for a sound Used Vehicle Age Management Process, yet very few (only the “great” ones) know that their process must be developed, implemented and executed to manage their used vehicle inventory as it ages, rather than when it ages. Used vehicle aging is a given; it cannot be avoided. However, it can be effectively managed and the negative effects can be minimized. Following are the ten components of what the NCMi faculty believes to be a “great” age management process.

  1. Maintaining a used vehicle inventory of no more than a 35-days’ supply. The best dealers today are maintaining an inventory of 26 to 30 days’ supply and turning their inventory 12 to 14 times per year.
  2. Promoting “urgency” and “velocity” as the primary watchwords for used vehicle inventory management. For many dealers this is difficult because it involves a significant cultural change within the organization.
  3. Establishing and enforcing a “hard turn policy” of 60 days or less. This requires that you transfer ownership of any used vehicle to someone else, once it reaches 61 days in age.
  4. Focusing on, measuring and score boarding the time from inventory acquisition to preparation for sale. This means both minimizing transit time on purchases and clearing trade-ins for resale.
  5. Conducting a regimented Trade Walk every morning that you have fresh trades or purchases available for review. It is mandatory that all on-shift sales and sales management personnel (together with service department representatives) attend and participate in the Trade Walk. Include the Sales Consultant Adopt-a-Car Strategy as a primary process step during the Trade Walk. This process ingredient will spread some of the critical used vehicle management tasks throughout the sales staff.
  6. Requiring that all used vehicles are immediately listed on the Internet (dealership website and third party classified sites) immediately following the Trade Walk. Always maintain a scoreboard detailing the vehicles in inventory without an Internet listing, without adequate photos (and videos), without compelling descriptions and without most current pricing.
  7. Ensuring that average reconditioning cycle time does not exceed 72 hours (3 working days) and that reconditioning cycle time is accurately measured and score boarded. Utilize a Pre-Display Checklist to document the successful transition of a used vehicle from the reconditioning department to the used vehicle sales department.
  8. Developing and implementing a Bucket System to identify and manage used vehicles as they transition from one age category to another (become “bucket jumpers”). Regardless of the groupings and definitions of the buckets you decide to establish, the key metrics you must always have on the tip of your tongue are (a) the percentage of inventory units under 31-days old and (b) the number of inventory units over 45-days old.
  9. Conducting a disciplined Daily Stock Walk to touch and discuss ALL of today’s bucket jumpers. As with the Trade Walk, it is mandatory that all on-shift sales and sales management personnel (together with service department representatives) attend and participate. The intent of this exercise is to answer one question: “’Why hasn’t this vehicle sold?” and to take whatever corrective action is deemed necessary. You cannot do too much research or have too much information on each bucket jumper. For example, how many phone inquiries? How many Internet leads? How many demo’s? What’s the VDP penetration percent? The Sales Consultant “parent” (from the Adopt-a-Car initiative) should have the answers you’re looking for.
  10. Ensuring that the retail pricing on the vast majority of your vehicles is very close to, or below, average market pricing. Too many dealers have unfortunately found that that if it’s not priced right, “the phone won’t ring, and the door won’t swing.” That doesn’t mean that you can’t “swing for the fences” on the right vehicle. And it doesn’t mean you’re joining the “race to the bottom.” It means that you have to price it right, with age management in mind and then be prepared to defend and manage your pricing with “documentation, rather than negotiation.”

And, yes, you guessed it…within the NCMi used vehicle management training curriculum, we do teach the details of each ingredient of the above age management processes. In July, we’re conducting every one of our used vehicle management training programs, including our 1½-day class in Chicago and a brand new “Mastery” level course for those who have already taken our Principles of Used Vehicle Management I & II classes. Click or call for details at 866.756.2620

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Gene Daughtry

The Sales Process in BHPH is Underwriting

BHPHIn BHPH, like any other automobile dealer, you’ll start the sales process out with a meet and greet. From there you should go in a different direction from other retail outlets. If you have been on a franchise dealer sales floor I am sure you or your sales staffs have joked about wanting a screening machine that they could walk a customer through for an instant credit reading. Since that doesn’t exist, your sales process is probably similar to: 1. “up” your customer;  2. meet-and-greet; 3. qualify; 4. land them on a rig; 5. proper walk-around; 6. trial close; 7. work the numbers; 8. ask for the sale.

In a BHPH operation, after you greet the customer, you do qualify them. Qualifying is the beginning of your underwriting process and helps your customer understand what you do. In my BHPH operations, we would ask customers to come inside and fill out a credit application before we began selling a car. Generally our salespeople would say, “Let’s go inside and see how we can help you, then we’ll look at vehicles you can drive home today.”

In BHPH, the sales process is really more of a sales outline and should be more about underwriting than selling. Frankly, selling cars is the easy part. In BHPH, information-gathering is a large part of the salesperson’s job description. No matter what the customer wants, the salesperson should go back to the outline and gather what the underwriter needs to make a decision. In BHPH, you are in the loan business and the focus is to build a successful portfolio. As a BHPH dealer the best information-gathering you will do is when your customer wants your help and is hoping for an approval.

No, every customer is not coming inside before picking a car. A few customers resist giving information until they are comfortable you have “the” vehicle they want. A few want details of your transaction before they will provide you with personal information and documents for verification. But the majority will come in, especially when your salesperson knows that selling before taking an application can be a huge waste of time.

Having this type of sales process requires flexibility and perception on the part of the salesperson. Any time you are dealing in sales, you have to be flexible. In my operations, our people were trained to understand and work with customers’ perceptions of car sales. Most customers coming to the store are uncomfortable. They are afraid of confrontation. They don’t want to tell the bad news story again, or they have a chip on their shoulder from their last experience trying to buy. Our salespeople were always working to get the customer inside so we could begin to determine what we had. Good underwriting helps you see who you are dealing with before the vehicle hits the street. The sales process is where that begins to take place.

Our basic underwriting rules were:

  1. Don’t sell them something they cannot afford.
  2. Don’t take the customer’s word for anything – always verify.
  3. Only sell to people from the surrounding area.
  4. Be honest with ourselves when underwriting.

In our operation, we filled out a detailed credit application and pulled a bureau. We required proof of income for the household (no proof, no deal). We asked for utility bills to help verify residence and we could see how they paid for the basics. Seven to 10 personal references (name, address, phone numbers and relationship) were required, and we checked them. Jobs and landlords were verified on every new customer. We used an internal score sheet as a guideline that included cash flow to help us understand the customer’s tolerance for new debt. Nobody rolled without verbal verification of full-coverage insurance. Obviously, we did not spot cars.

There are BHPH dealers that sell lower price cars and roll almost anyone that says yes. Other dealers use ignition shut-off devices or GPS units to increase confidence in their loan approvals; we did not. There are 1,000 ways to operate BHPH, so your process and underwriting should reflect your risk tolerance.

No matter what price vehicle you are selling or what your risk tolerance, your sales process should be considered an important part of underwriting and collections.

Gene Daughtry is a BHPH 20 Group moderator, trainer and consultant. To learn more about the opportunities in BHPH/LHPH, visit with Gene at the NCM open house next month at the National Alliance for Buy Here, Pay Here Dealer Conference in Las Vegas. To RSVP or email him directly at

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