Turnaround Specialist: 5 Secrets of Dealership’s Used Vehicle Success

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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:

  1. 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
  2. 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
  3. 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.
  4. 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.”
  5. 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.”

Dale Pol­lak, founder of vAuto, Inc, can be reached at dpollak@dealer-communications.com or visit him on his blog at Dale Pollak.com. See the full arti­cle here.

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