By Dale Pollak
“We’re making more net profit in a month now than we used to make in an entire year. That speaks to two things – how bad we were before and how good we are now,” says Paul Lynch, general sales manager at DePaula Chevrolet, Albany, N.Y., who has become a turnaround specialist in the store’s used vehicle department over the past 15 months.
Check out some of these results:
- Volume: The store has grown from selling an average 60 used vehicles/month, to an average 130/month.
- Gross Profit: With the extra volume, the dealership’s front-end gross profit average has improved to nearly $1800/unit. Each sold unit also averages $1,000 in F&I and $350 in service gross profit.
- Retail-Readiness: “If the cars aren’t done in the shop and pictured up and online in 72 hours, we feel very uncomfortable,” Lynch says.
Lynch’s results are an instructive example of a dealership that bit the bullet and decided “enough is enough” in used vehicles. “We were in complete and utter disarray,” Lynch says. “It used to take us 16 days to get a car ready for retail. We had 90 cars over 90 days old. We weren’t really making any money because stuff would sit there.”
Dale Pollak says Lynch shares highlights of the operational changes he undertook to help other dealers improve their used vehicle department performance and profitability:
- Separate reconditioning team: The store’s previous 16-day reconditioning time average owed to the service department’s emphasis on customer pay work. The fix: Use a portion of the store’s body shop where three technicians and a writer focus solely on reconditioning used vehicles
- Acquisition discipline: “We don’t buy or sell cars with bad CARFAX reports anymore,” Lynch says. Two buyers—one using online auctions the other at physical auctions—focus on acquiring vehicles with a low market days supply to ensure they sell quickly
- Pricing Precision: Lynch’s managers review the price on every vehicle once a week for nearly four hours as a group. They supplement the weekly review with daily checks of VDP conversions and adjust prices whenever they spot a need. “We’ve got multiple sets of eyes on our pricing,” Lynch says.
- Market-focused sales: Sales teams share comparison cars and prices with customers to underscore why the dealership’s asking price and vehicle represent a good deal. “Our sales team understands how and why we price our vehicles,” Lynch says. “We don’t work a deal with a customer until they’ve seen the evidence folders on every car. That’s what helps us hold gross.”
- An “all-in” mentality: “If you don’t have everybody on board, understanding what you’re doing and why you’re doing it, you’re fighting an uphill battle,” Lynch says. “In a lot of dealerships, there’s animosity or dissension between departments. I think our biggest accomplishment was getting everyone to value the same things and march together in the same direction.”