I’ve had chocolate chip cookies on my mind lately. The reason? I can’t eat them the way I used to, thanks to a daily diet and exercise regimen I’ve adopted.
I’ve come to (reluctantly) embrace the “new me” because I now understand its rewards. I have more energy. I sleep better. I’ve shed a few pounds. I no longer get my doctor’s “I’m warning you” look when I go in for a check-up.
But, I miss my chocolate chip cookies. And I also miss being able to eat what I want, when I want, with little thought about the consequences.
I share this anecdote because it highlights a transition that I believe is necessary for dealers given the realities of today’s used vehicle marketplace. To succeed in an era that is unquestionably more challenging and volatile than it used to be requires more focus and daily discipline than many dealers are accustomed to applying in their used vehicle departments.
The fact is, many dealers could use the equivalent of a daily diet and exercise plan as they acquire, recondition, merchandise and sell used vehicles to achieve maximum return on investment (ROI) and profitability. The following six steps can help dealers achieve a “new me” in their used vehicle operations:
Step 1: Control your appetite
In today’s market, dealers can’t just acquire used cars because they think they need them. This traditional mentality will almost certainly cause inventories to bloat, creating profit-draining aged units and unnecessary wholesale losses. A better bet: Use local market supply, demand and sales metrics to guide the “right” number of the “right” cars to acquire in specific segments.
Step 2: Choose leaner, less fatty foods
When I want a chocolate chip cookie, I’ll eat an apple. The choice means fewer calories and less fat, and I avoid the post-cookie sugar crash. For dealers, high-dollar used vehicles are like a chocolate chip cookie for the market — they typically sell less quickly than lower-cost units and their gross profit potential is often short-lived. The fix: Aim for an average used vehicle cost of $15,000 or less. This benchmark will, by definition, mean fewer harder-to-digest cars in your inventory and more consistent profitability.
Step 3: Count the calories
Good dieters are vigilant about where their daily calorie count stands. Dealers should apply the same discipline and principle in used vehicles. They should mind the metrics that detail a vehicle’s ROI and profitability potential from the moment it’s acquired to the moment it sells. Just as a dieter might skip a morning snack to make up for a big breakfast, dealers should balance reconditioning costs and pricing/merchandising decisions to fit whatever conditions the market hands them on a given day.
Step 4: Exercise regularly
For me, this means climbing on the treadmill every day, whether I want to or not. For dealers, the daily exercise takes the form of discussions between used vehicle managers, appraisers, buyers and service directors about current market conditions and the opportunities and risks they pose for vehicles that need to be acquired, reconditioned or sold quickly. A tip: Velocity dealers say this daily pow-wow works best first thing in the morning while the prior day’s trade-ins are fresh and other to-dos are less pressing.
Step 5: Expect setbacks
A key reason my diet and exercise plan is working owes to a “failure is not an option” mindset. This has helped me remain committed to my goal for a healthier lifestyle, and get past the inevitable times I’ve fallen off the wagon (sometimes, dried fruit and nuts simply don’t cut it). This same mentality is essential for dealers who want to maximize used vehicles performance. Some managers will resist the change to a more metrics-driven business model; others will have difficulty adapting to a higher degree of discipline in their daily work flow. “It’s not whether you get knocked down, it’s whether get up.” (Thank you, Vince Lombardi.)
Step 6: Recognize the results
It’s gratifying when I hear a “You look great!” compliment. Unfortunately, competitors aren’t likely to compliment dealers who capture more market share with their leaner, meaner and more profitable used vehicle operations. The solution: Recognize the achievement through pay plans and pats on the back as the results roll in. The recognition should extend to everyone involved in the performance improvement — down to the detailers and technicians who turn cars quickly and sales associates who make your market-based pricing into a deal-closing advantage.
This holistic recognition provides the necessary fuel to make the more ROI- and profitability-focused “new me” in used vehicles an identity that sticks for the long haul.