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Tag Archive: Used Vehicles

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/

NCM Associates

#AskNCM: What’s the silver bullet to improve UV?

Is there a secret to increased used vehicle profits? “Yes!” says NCM expert Robin. Find out what Robin thinks are the most important things you can do to improve your UV department. Here’s a hint: Get your “walking” shoes on!

Have you already started Robin’s must-do recommendations for pre-owned? Tell us about it below. Have another question for #AskNCM – comment below! 

Permanent link to this article: http://blog.ncm20.com/2016/06/askncm-whats-the-silver-bullet-to-improve-uv/

Lee Michaelson

What do I do with today’s bucket jumpers?

Cars

Bucket jumpers—vehicles that reach 16, 31 or 43 days in inventory—pose a huge strain on your dealership. Make certain your bucket jumpers get all the attention required to reduce inventory aging issues and improve turn.

Investigate the vehicle

A vehicle becomes a bucket jumper by sitting too long in your inventory. The first thing you need to do is check on how much interest the vehicle is generating on the internet.

Prior to the stock walk process, analyze how much prospect activity garnered attention on each vehicle. Here’s what I suggest you evaluate:

  1. The number of times the vehicle appeared on a search results page (SRP)
  2. How often prospects clicked through to the vehicle details page (VDP)
  3. The vehicle’s VDP conversion percentage (Divide VDP by SRP)
  4. Confirm the number of inbound phone calls received on each vehicle
  5. Check the number of emails received requesting information for each

Once you have a sense of how much interest the bucket jumper has generated, inspect it in person:

  1. Open all of the doors, the hood and the trunk; identify any issues that require correction.
  2. Start the vehicle. Does it operate properly? Check all systems such as climate, navigation and audio. Open the sunroof, and make certain the windows, locks and seats are in proper working order.
  3. Inspect the exterior for problems that require correction.
  4. Determine if the vehicle needs detailed again.
  5. Keep a list of the vehicles you identify that need additional reconditioning, and make certain the reconditioning is completed in a timely manner.

Involve your staff

The most important question about a bucket jumper is: Why haven’t we sold it? Ask your staff how many opportunities you’ve had on lingering inventory and how many of those opportunities went on a demonstration drive. Get their feedback about the vehicles, especially any comments they remember from customers.

Once you’ve gathered all the information—how much interest the car is generating, its condition and how many people have seen or test driven the car—it’s time to implement your action plan.

Address the problems

Typically, there are three possible resolutions to the bucket jumper problem. The vehicle needs additional reconditioning—arrange for the repairs immediately or wholesale the unit. The vehicle is priced too high—keep it, but adjust the price immediately. It’s not a good vehicle for retail—wholesale the vehicle and redeploy the cash.

Selling the bucket jumper list

Be aware that the decision to keep a bucket jumper means a commitment to more work. Not only will you likely need to adjust its price, but you’ll need to evaluate its marketing and merchandising. Once these are addressed, you should see movement; if not, it’s time to reevaluate.

Are the bucket jumpers in your inventory slowing your sales? Share your experiences below. 

Permanent link to this article: http://blog.ncm20.com/2015/10/what-do-i-do-with-todays-bucket-jumpers/

Steve Emery

Are You Really Managing Your Used Cars?

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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 semery@ncm20.com.

UV Training

Permanent link to this article: http://blog.ncm20.com/2015/07/are-you-really-managing-your-used-cars/

Robin Cunningham

Unrealized Opportunities in the Used Vehicle Department

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Forgive me for saying this, but from where I now stand, it is quite apparent to me that there is way more opportunity for improving profitability than most dealership managers are aware of. I certainly know looking back on my career (and I thought I was very pro-active) that there was so much more opportunity to be realized than I was able to completely grasp at the time.

Most people agree that there is more upside potential left on the table, they are just not aware how much there is or how to attain it. Today I’d like to share some of the upside potential that we see in relation to the used vehicle department. One of the primary opportunity areas in the used car department is in increasing the average ratio of used to new vehicle sales.

We work with a Nissan dealer, in a single city market, that three years ago was selling close to a 1:1 used to new ratio. They realized there were only so many new Nissans they could sell no matter how aggressive they got with pricing and marketing. So, they got very clear on what does and does not work in today’s used vehicle market. They made steady progress in the quality of their processes and accountability management, and today are selling a 3:1 used to new ratio.

One of their managers was in class a month or so ago made a comment during a discussion. He said that as a variable department, they “freak out if and when any used vehicle hits 21 days in stock.”  They so highly value the processes in place from each vehicle’s first day in stock, that at 21 days, they know something is going terribly wrong. That comment raised a lot of eyes in class, especially from the managers of stores with huge aging issues. To get to that 3:1 ratio took a lot of trial and error, and a high degree of trust in their processes. It was all made easier by beginning to see it adding up in more total used vehicle gross profit.

To realize that opportunity, especially if one is still struggling in the used vehicle department, a pretty systematic overhaul of everything is often needed. That would include such processes as:

  • Acquisition
  • Appraising
  • Stocking
  • Reconditioning
  • Initial Pricing
  • Internet Marketing
  • Re-pricing
  • Desking policy
  • Pay plans
  • Aging

For sure, the change in focus from the amount of gross per vehicle retail to total department gross is required. To clarify, we are not against getting as much gross per vehicle as you can; but you just need to know which market segment each vehicle you are stocking is in, so your pricing policy is not getting you into aging problems.

I have been saying of late that our initial pricing policy is our turn policy. If you are pricing above market average right out of the box, we rarely see the pricing come back in line before the vehicle has aging issues, because the above market price has kept it largely invisible to the shopping public on the Internet… where, of course, most shoppers are today.

I just referred to what “market segment” each vehicle is in. We break those segments into: A, B, C and W categories. CPO, of course, is another category and I am going to come back to that separately.

A Vehicles

An “A” vehicle is a one of a kind, mostly irreplaceable vehicle. It is generally easier to replace the customer than it is the car. These almost always come from a trade, either rare in the first place, with very low miles, or both. At most, this makes up 10% of inventory. These vehicles should have a much higher than average gross profit, so the opportunity there is for a higher PVR.

B Vehicles

The “B” car is usually our own brand and is still under factory warranty. These are the most available cars to us, through trade, auction or our service drive. This is the case for all dealers, so the day’s supply is high, relatively speaking. These cars have the highest potential for wholesale loss, largely due to over-pricing on the Internet. Because these are very nice cars with lower miles on them, it can be tempting to try to get “above market” prices for them. Without a doubt, most vehicles with aging issues come from this segment, especially the ones bought at auction.

Because this segment makes up 60+% of inventory dollars, it can have devastating effects when these dollars become aged. The strategy for this segment is to aggressively price them to market immediately, get the F&I turn and the gross profit from reconditioning, and then go get more just like it. These will have slightly less than an average gross profit per vehicle. But again, since this is where the largest dollar amount of inventory is, a faster turn will equate to more total departmental gross. Again, the focus and opportunity for total departmental gross profit has to be primary here.

C Vehicles

The next segment is the “C” car. These are cars that are out of factory warranty, though a warranty could still be sold. They have higher miles and don’t have to be in perfect condition. These are the vehicles everyone seems to be wanting and almost always come from trades. The opportunity is a gross per vehicle that can be at or slightly higher than average. The return on investment is higher because they have a lower average cost of sale. Fortunately, most dealers are keeping more of these vehicles for retail these days, because in the past many got wholesaled and were the key source of inventory for the independent dealers. I know I wholesaled a lot of those in my past, and I now realize how we were missing out on possibly the richest segment of the business.

CPO Vehicles

The other retail segment that gets uneven attention is the certified pre-owned category, or CPO as we all call it. The luxury brands are all strong in this segment, and those manufacturers play a key role in helping make sure it is viable by actively supporting the strategy. For most of the other brands we see a very spotty consistency of dealers taking full advantage of this opportunity. It truly is like a separate franchise and has to be treated that way.

I have seen dealers of almost any brand take full advantage of it and other dealers from those same brands try to play both sides off the middle. Those dealers end up not having many CPO vehicles and that likely leads to less total volume, less gross per vehicle, less reconditioning gross, less future service and parts gross — and ultimately less customer retention. The other thing I see happen with CPO vehicles is when a dealer trades or acquires vehicles other than their own brands that have a strong CPO compliance; it makes it harder for competing dealers to retail those vehicles successfully. One thing we see that can offset this are some of the third-party, certified pre-owned programs that are available in the market place, like the Motor Trend Certified Program.

I would be remiss if I did not mention the very big opportunities that often get untapped in F&I. The public groups, who are under the most scrutiny of all, are at about $1,100 per vehicle retailed net after chargebacks. Many dealers are well above that, but most are way off that number and it really seems to be a focus issue. Selling more financial products and less focus on rate has been the trend, and it really seems to be working. Many of the financial service vendors provide the training as well.

W Vehicles

The last used vehicle segment is the “W” car or wholesale. There are two levels of wholesale: The ones we decide not to keep at the time of acquisition for various reasons (too many miles,  poor mechanical condition, or too expensive to keep). This level of W vehicles is actually a profit center.

Then, there are the vehicles we got for retail and for some reason have not sold. Maybe we have kept them for too long and now believe we have to get rid of them, often at a loss. Our friend Dale Pollak says there are only two reasons that could possibly happen: We somehow could not find the right price that others were selling the same vehicle during that time frame or we were unwilling to put the vehicle on that price. Knowing this is a possible unrealized opportunity can allow you take advantage of this.

This of course was just a very brief discussion of some of the most BASIC OPPORTUNITIES available in the used vehicle department that are very often not taken advantage of.

UV Training_Aug2015

Permanent link to this article: http://blog.ncm20.com/2015/07/unrealized-opportunities-in-the-used-vehicle-department/

Robin Cunningham

Is Your Used Vehicle Manager More of a Sales Manager or an Asset Manager?

Car key, credit card on a signed sales contract

This may seem like an odd question, but it’s at the root of a lot of challenges so many dealers have in being as successful and profitable as they can be in their Used Vehicle Departments.

Over the last two weeks at the NCM Institute, I was able to work with both a Used Vehicle class and a General Manager Executive Management class, where the primary discussion was used vehicle management.

One of the facts we deal with is that the average Used Vehicle Manager at a dealership has been in that position for less than one year.  For discussion sake, let’s say that one of the reasons could be that their predecessor got promoted to GSM or even GM.  The rest likely failed at being able to move the department successfully and profitably forward.

Two weeks ago during introductions, in the Used Vehicle Management I class, a young man stated that he had just been “promoted” to Used Vehicle Manager 2-3 weeks prior.  He had been the New Vehicle Manager for about a year before that and sold cars for a couple of years before that.   Without trying to  put him on the spot,  I casually asked him how much training he had gotten all the way back to his “selling days,” and then as he became a New Vehicle Manager.  He was given very little as a sales person and effectively none upon being “promoted” to a New Vehicle Sales Manager.  This really is the norm in our industry.  The very good news for this young man (and the dealer that chose to send him to us for some education and training;) is that he is going to have a much better chance to be successful in his new and very challenging position as a Used Vehicle Manager in today’s unforgiving marketplace.

This scenario of someone being “promoted” to Used Vehicle Manager from a New Vehicle Manager is very common, actually.  It is likely that this person has become a good closer and desk manager.  They may even have become good at working with salespeople on a daily basis to help them become more successful and productive.  This, however, does not prepare the person for almost any of the skills necessary in becoming successful as a Used Vehicle Manager.

Maybe one of the most key skills is the appraisal process.  This is every dealership’s #1 source of Used Vehicle Inventory.  We had a dealer’s daughter in class late last year who spent a number of years outside the dealership gaining experience in other environments.  This included working as an appraiser/buyer at Car Max.  When we were going around the room talking about people’s appraisal experience and philosophies, this young woman kind of stunned the guys in the room with just how thorough of an Appraisal Process she learned and performed while working at Car Max….it took her five minutes to explain the process.  When she was done, the one question that had come to my mind was how much training was she provided in order to do appraisals that thoroughly.  She thought about it for a second and said 6-7 MONTHS!!!  I then went around the room asking others how much training they had before they were allowed to appraise cars.  As you might imagine, the consensus was pretty close to zero.

As I often say we are only trying to uncover upside OPPORTUNITY for our students to identify and return to their dealerships with realistic ways to achieve them.

So, going back to the title of this blog: Is your Used Vehicle Manager more of a sales manager or an Asset Manager? More and more dealers are realizing that in today’s market, if they are going to get the greatest gross profit, and equally or more importantly, the maximum return on investment, they need someone to be a full time asset manager of their multi-million dollar investment in used vehicle inventory.

So beyond just the appraisal process that is so vital, there are also the STRATEGIES for: the software tools we use (AXX, First Look, vAuto, Red Bumper, etc.); pricing and re-pricing; reconditioning; internet presence (price, pictures, descriptions, placement); wholesaling (both primary wholesale and over-aged wholesale); tradeWalk/stock walk; model inventory, and so much more.

With the majority of salesforces being combined, selling both new and used vehicles, there really are plenty of people that are good closers and desk people.  So think seriously about making sure you have a dedicated Used Vehicle ASSET Manager – It’s more than a full time job itself.

Permanent link to this article: http://blog.ncm20.com/2015/02/is-your-used-vehicle-manager-more-of-a-sales-manager-or-an-asset-manager/

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/

Robin Cunningham

Are Win-Win-Wins Possible in the Dealership World?

thumbs up

Is it just me, or does it seem like so much of what we take for granted in life is a zero-sum game? Meaning, if and when we or somebody wins… somebody else has to lose.

Football season has just started and baseball season is winding down; and it’s all about who is winning and losing. We take that for granted and quite honestly, don’t think much about it.

Even in our world of the retail automotive industry, there is a lot of zero-sum game thinking at work. We see the competition of Ford F-150s outselling Chevrolet Silverado; Camry outselling Accord; BMW, Lexus and Mercedes battling it out for the Luxury crown every year. In our local markets, dealers battle each other for the right to call themselves the number one selling dealer in town or the number one CSI dealer in town, of every brand. These are pretty innocent competitions really, but a lot of dollars are spent each year by the manufacturers (and some dealers) to make sure someone knows who the winners and losers are.

For the last three years I have worked as a lead instructor at the NCM Institute. I spend all my time with dealership managers, showing them how they and their associates can WIN in their department or, in the case of general managers, the total dealership. It became apparent to me some time back that the way we approach everything here is: NOT a zero-sum game! In fact, we believe there can be a win-win-win for all of our efforts.

  • A win for the customer
  • A win for the dealership
  • A win for our associates

As the Church Lady used to say on Saturday Night Live, “Well, isn’t that special?”

Church Lady - Dana Carvey

Yes it is! Let me give you a couple of examples.

USED VEHICLE DEPARTMENT

Around 90% of all customers do all their pre-shopping of used vehicles on the internet. When we price our vehicles at “market-based” prices, we show all of our cards up front on both our website and any third-party sites that we use, including:

  • Pricing
  • Pictures
  • Vehicle descriptions,
  • “Why buy from us” marketing messages

When customers send e-leads, call us or walk in the door, they can interact with dealership personnel who have been trained on value-selling. That includes our salespeople being trained to anticipate that the customer has been on the internet, to acknowledge that, and reinforce that by using Value Folders that include:

  • Car Fax, service records
  • Reconditioning reports
  • Data confirming how competitive our pricing is

Week in and week out, the dealership managers we work with are confirming that they are discounting up to $700 average off of internet pricing…without the customer really even asking for it! When we price and sell our vehicles at or near the average price to market, especially within the first 30 days in stock, we get to turn our inventory dollars up to 12 times per year. Our salespeople get a commission from the highest average gross the car will ever have, and our customers are value-sold cars that they found themselves on the internet at a price they feel good about because we showed them all the supporting documentation to support their decision. Win, win, win!

SERVICE DEPARTMENT

Most service advisors are working with too many customers per day and taking inbound phone calls.  This pretty much guarantees that they do not have time to build the crucial relationship with each customer, which is their number one priority. Because they are too busy, there is rarely a walk around with the customer on each car; rarely is a menu or any recommended maintenance discussed; rarely is a multi-point inspection performed – and if it is, it rarely produces many additional service requests because our relationship with the customer isn’t that great.

When we slow down the service drive process and mandate that each service advisor perform a walk around with the customer, a trusting relationship begins to be established. If an appointment coordinator or BDC is taking inbound service calls, they can establish if the customer’s car needs anything based on time, mileage or history – over and above what they originally contacted us for. We can inform our advisors of this information and hold them accountable for communicating this to each customer. When we perform multi-point inspections and communicate any findings back to our clients, they will take that information more seriously due to the trusting relationship begun by our advisor. Our advisor will set the customer’s next service appointment based on time, mileage and history. The customer now has a reason to become a “retained” customer, the dealership gains the ongoing business from those customers – and the advisor not only generates more dollars and hours  per visit, but helps ensure that the customer wants to come back over the lifecycle of their vehicle.  Win, win, win!

See? It is possible. One of the pleasures of my work is showing our clients exactly how win-win-wins can be achieved. If you would like more examples or are ready to learn more, feel free to contact me or any of our associates.

internet

Permanent link to this article: http://blog.ncm20.com/2014/09/are-win-win-wins-possible-in-the-dealership-world/

Larry Dorfman

CPO: What is Your Dealership Missing?

Larry Dorfman is the CEO of EasyCare and a new guest contributor to the Up to Speed blog. Since 1984, EasyCare has set the standard in automotive benefits created to enhance the vehicle buying and ownership experience. Read more about EasyCare here

CPO Lo

As CPO sales continue to break records and consumers are consistently willing to pay more for them, making sure you are competitive AND able to hold profit on the “Other Makes and Models” (OMMs) in your auto dealership’s inventory becomes more and more important. How are you competing with the factory CPO vehicles in your market on an off-make vehicle in your inventory? Most dealers have one answer to that question: “Price.”

If that is your answer, why not certify your OMM vehicles to win online and in the showroom against your competitors’ factory CPO vehicles? Dealers who do are selling more cars, holding more profit and building more loyalty with the customers who are buying them. They are digitally advertising these vehicles as “Certified” or “CPO” and creating more conversion opportunities with consumers looking for certified vehicles. When the customer comes to the lot, they don’t have to compete on price alone. They have a much better “why buy here” story to tell/sell against their competitors’ CPO vehicles.

There are four keys to holding pre-owned margins in today’s digital marketplace.

I think we all agree that managing and pricing your inventory appropriately is the number one key to having a successful pre-owned process.  With that being said, implementing the following three items will put you head and shoulders above your peers:

Respond to the consumer’s search with a relevant ad. The more your ad and landing pages match the consumer’s search, the better chance you have of search engines displaying and consumers clicking your ad.

Provide as much information about the vehicle as possible on the landing page to build value up front and “win the click.” Research is clear; consumers shopping for “certified” are looking for certified, but many don’t actually understand what the specific CPO program covers. Educating them on the landing page will drive more conversions and more sales.

Certify as many of your pre-owned vehicles as possible. Consumers are paying more for the confidence they have in CPOs. Whether you are presenting a factory CPO, or an independent certified program on your other makes and models, certifying as many as you can creates more opportunities, more sales and more profit.

Adding certified value without process and training is just adding expense. The brilliant man who wrote Velocity and created V-Auto told me this years ago, and the statement is as true today as it was then.

The keys to certifying your other makes and models are:

  • Partner with a national brand consumers recognize and trust.
  • Keep the investment reasonable, and make sure you have a process that allows you to recover that investment in additional gross profit and in F&I.
  • Deliver a strong value proposition that makes your vehicles “different,” and most importantly…
  • Make sure your team is trained to deliver the experience you are promising online, in the showroom.

Other benefits you will enjoy from certifying your OMM vehicles are: offering more on trades for “hot” other make vehicles in your market, buying more vehicles out of your database and service department, and bringing more balance in your overall pre-owned operations.

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Permanent link to this article: http://blog.ncm20.com/2014/09/cpo-what-is-your-dealership-missing/

Robin Cunningham

How Profitable is Incremental Growth?

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I think it is safe to say that every business operator is planning, forecasting, or at least hoping to increase their sales and profits in whatever business he or she is involved in.

In the retail automobile business, that growth can come in many forms, such as:

  • Selling more new or used vehicles
  • Increasing the gross profits of the vehicles you already sell
  • Increasing finance & insurance income per vehicle retail
  • Reducing the aging of your used vehicle inventory
  • Reducing your reconditioning cycle time in order to get the vehicle front-line ready sooner
  • Increasing the repair order count in the service department
  • Increasing the gross profit margin in the service department
  • Increasing the number of parts on the shelf that the service department needs each day

There are many more forms growth can take, of course, but these are pretty representative of the opportunities available to most dealerships we work with.

The reason I say that incremental growth, resulting from actions like those mentioned above are far more profitable than one might think, is because, for the most part, the personnel, semi-fixed, and fixed expenses are going to be nearly the same in our operating departments, whether or not we drive increased sales and gross.

If we can keep the selling expenses in the range of 30-35% of total all-in gross, when we incrementally add more gross, we can retain 65-70% of that increased income as net profit on the bottom line. If a dealership is doing really well, its total expenses will typically run 70% of gross profit, leaving a net profit metric of 30% net-to-gross. So growing our business, while being able to maintain our expenses at best practice levels, can drive more than double the incremental net-to-gross metric than would typically be the case.

There are several places we see this demonstrated during our NCM Institute classes. Our students are encouraged to develop and document at least two Guarantee of Action Plans (GOAs) each evening after class and then present them to the class the following morning. These GOAs describe and quantify their ideas. The GOA could be something like selling 10 more used vehicles per month by pricing them more competitively to the market. The quantification might look like this: 10 incremental used vehicles at $2,976 all-in gross, which would be $29,760 additional gross per month, or $357,120 annually.

The primary selling expenses (commissions to salespeople, F&I producers, and sales managers, advertising, floor plan interest, policy and delivery expense) will be maintained at no more than 35%, and assuming that no additional incremental expense is required, the department would retain 65% of the $357,120 or $232,128 in additional net profit. The equation I used looks like this: (10 x $2,976 x 12 x 65%)  If these 10 extra vehicles were not sold, the same 65% in expenses would still be incurred; but not any extra gross profit nor subsequent net profit.

When working with variable department managers, another action we suggest our students begin focusing on every day is to reduce the price-to-sale gap. That is the difference between the advertised Internet price of a specific vehicle and the actual retail transaction price at the time of sale. In the beginning, this can be a huge number, so we suggest starting at a target reduction of $200 per car.  As an example, for a dealership retailing 80 used cars per month, reducing its average price-to-sale gap by $200 per vehicle, and keeping its variable selling expenses at no more than 35%, would increase its net profit by $124,800. The equation I used looks like this:  (80 x $200 x 12 x 65%).

By the way, we work with a lot of variable managers, and, before we begin teaching them this best practice, they tell us that they believe their true average price-sale-gap is currently at least $700 per vehicle retailed… off Internet pricing! (Don’t get me started!) So the $200 per vehicle target reduction that we’re suggesting is extremely conservative.

As I said at the beginning, there are numerous opportunities for increasing sales, gross and reducing expenses in our dealerships these days. I hope my brief message validates for you the powerful effect that incremental growth, combined with a controlled expense structure, will have on your bottom line!

financial-analysis

Permanent link to this article: http://blog.ncm20.com/2014/07/how-profitable-is-incremental-growth/

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