Why vAuto?

The Changing World

By Dale Pollak

Can we agree on this? Instead of browsing newspaper ads and deciding to visit a single used car store to check out a single vehicle, today's consumers can effortlessly compare and shop dozens of used vehicles locally and within hundreds of miles from their home with a few clicks of their mouse.

As a result, the business of acquiring wholesale inventory and selling used vehicles has become more complex and many dealers and used vehicle managers have yet to understand the reasons for the transformation — much less what they should do about it. I'll bet many dealers and managers reading this can recall home-run deals with $6,000 grosses.Those occur rarely, if at all in today's more efficient marketplace.

In those days, we as dealers were in the driver's seat, we could afford to be "too high" in a used vehicle. If a manager paid too much for a unit, it would only be a matter of time before a buyer would come along and turn the acquisition mistake into an acceptable deal.

Now can we agree on this? Those days are gone.
Today, the influx of late-model, similarly configured factory fleet, off-lease, certified and program vehicles has further eroded the idea that every vehicle is unique. Used vehicles have become more of a commodity. As customers use the Internet to shop for vehicles, their challenge isn't to find the dealer who has the "just right" vehicle they want; it's sorting through dozens of similar choices from many dealers. Most dealers have yet to recognize these fundamental shifts in the marketplace, and if they do, few know what they should do to respond.

I ask this question of dealers every day: "Is it true that the more 'right' we own a used car, the faster it sells, the easier it is to make gross and the less likely it is to become aged?" If you are like every dealer I have spoken with, your answer is "absolutely yes." What we are saying is that "equity" (how we own the vehicles) matters more to success in terms of higher grosses than any other single factor.

If we are under water with a unit, we can no longer rely on our skills as salesmen or marketers to "work out" of the vehicle. This is the reason why, for many dealerships, volume and grosses are down, while aged inventory becomes a greater-than-ever challenge. The skill set that leading dealerships across the United States use today is equity management. How much does equity matter? With the experience of helping hundreds of dealerships manage equity, I have found that a 5% equity variance (positive or negative) will create a 20% change in used-vehicle inventory turn. vAuto can do the same for you — our promise is a 20% increase in your inventory turn within 60 days!

A good used car manager just knows when a prospective trade-in is right for his lot. He knows in his head and his gut that the vehicle will move quickly and what kind of gross profit he can expect. It's not really something you can teach in a sales-orientation session. What a good sales person has lacked until now is financial insight in how his real-time decision will affect the entire used-car portfolio return and average gross profit.

With every decision the used car manager makes concerning which vehicles to put on his lot, he is determining that dealership's "equity" position. Equity here means: "The market value of securities less any debt incurred." In the language of dealers, negative equity is often referred to as if you paid $10,000 for a vehicle and could only wholesale it for $9,000, that vehicle holds $1,000 of "water." Good used vehicle managers may know how much water is on their lot, but not on a daily basis.

Because of the detailed information our customers have today about vehicle values, having negative equity on the lot can spell disaster. No amount of sales prowess will be able to turn that water into gold. The fundamental challenge in managing inventory equity is that front-line decision makers are primarily skilled as merchandise and sales managers. This, in and of itself, is not wrong because we are in a sales and merchandising business — but it's not enough. Today, in addition to being a great sales and merchandising manager, a decision-maker also needs to have financial investment skills and discipline. Specifically, he or she needs to have equity awareness. Equity enlightened decisions allow the used car department personnel to build inventory equity and achieve higher volumes and gross profit levels.

We know, for instance, a 5% variance (positive or negative in inventory equity) will create a 20% change in used vehicle inventory turn. A dealership's used vehicle inventory turn over the next 30 to 45 days can be accurately predicted by measuring its current equity. There are five critical decisions made every day in used vehicle operations that influence equity. They are: acquisitions, wholesale dispositions, reconditioning, pricing and desking.

Our industry today is managing the symptom of a problem. Dealers will inevitably tell you that the vehicles on his lot in greatest need of wholesale or retail disposition are those that have been on the lot the longest. Aged inventory is not the problem, but a symptom of a problem. Any used car manager can pick up a phone and wholesale any car on his lot at any time. The question becomes, "At what cost?" Therefore, the No. 1 factor that causes aging in used vehicles is lack of equity. If the vehicle's equity position is negative, it is usually overpriced, customers don't want it and salesmen don't have the proper incentives to move it. So the new paradigm in used car management is managing equity, not age—move vehicles with little equity quickly and replace these vehicles with stock that has more equity.

Our equity-based management solution, vAuto, allows dealers and managers to instantly recognize and treat any used vehicle in stock as aged inventory irrespective of its actual age if it is equity-impaired. It also allows managers to make inventory equity decisions based on all five of the critical factors.

Our World Has Changed. Today, consumers compare our used vehicle inventory for price locally and regionally.They come to our lots armed with prices and lists of vehicles from our competitors they have found on the Internet. It has become a challenge to get the highest gross profit possible on any particular vehicle. Unless we are managing our equity by owning every vehicle on our lot "right," we will not achieve our profit goals and inventory turn benchmarks.

vAuto provides used vehicle managers with a powerful tool in selecting wholesale inventory and buying trade-ins. It's more than just a tool. Ours is a proven methodology for inventory management that improves net profit. Regardless of the size of your dealership, your inventory is your single largest investment.This inventory is the dealership's primary source of financial liquidity.As a result,the inventory's overall value and equity is a critical component of profitability and turn. It should be managed like Wall Street manages an equity portfolio. vAuto enables managers to make the right equity decisions during: acquisition, wholesale disposition, reconditioning, pricing and desking.

Many of the nation's largest dealers in urban areas, as well as small dealers in rural areas, successfully manage their inventory with vAuto. The results are impressive. Our dealers, on average, have increased used vehicle gross, inventory turn and unit volume by 20% in 60 days.

Here's what Tim Ciusuli, owner of Planet Honda in Union, N.J. had to say: "The vAuto scoring process has increased equity in my used car department. The system measures everything. You can't manage what you can't measure.

The key yardstick you want to use when deciding on whether to change or upgrade the way you do business is your net profit. vAuto improves both profitability and stability by use of its proprietary technology, which is based on the same principles used by leading investment institutions. These systems include: establishing investor objectives; providing sales managers with the most current available market information; continuous monitoring of investment performance; and real-time notifications of inventory decisions from key personnel.

vAuto makes a promise. If inventory equity is not improved by 5% and turns by 20% within 60 days then the dealer can disengage. There are no contracts or long-term commitments — ever. The vAuto system improves your net profit by facilitating inventory decision-making by providing the decision maker with real-time information about trade-ins or current inventory in terms of the equity position of the vehicle in question and the overall inventory portfolio. By owning the vehicle right, the dealer or used vehicle manager can make more informed decisions about: acquisitions; stocking; dispositions; reconditioning; and departmental performance reporting.

Using a dealer's existing dealer management system and a Web-enabled cell phone or any PC, a dealer can oversee each and every inventory decision made by the used car manager, or check his own decisions using this proprietary system. Regardless of dealership size, structure or systems, vAuto will bring significant and immediate improvement to used vehicle department's profit and turn. The only requirement is a management philosophy dedicated to performance improvement.

Let me ask you a question. If your stock broker was regularly making purchases on your behalf and buying the stock for more than you could ever sell it, how long would that relationship last?

Used car managers can make similar mistakes. At times they may offer too much for a trade-in or spend too much for inventory at auction. They may buy the right vehicle, but spend too much for reconditioning. They may simply not take action when it is time to wholesale out of a vehicle to cut losses. How long should that last?

If there were a tool and a system that would enable you and your managers to look at your inventory of vehicles the same way a good investor manages a portfolio of investments, would you consider giving the system a test drive? vAuto, the company I founded a little more than one year ago, is now helping leading dealers make inventory decisions based on the "equity" position of their inventory.

Dealers often refer to negative equity as "water." The challenge for used car managers and salesmen is to bail out that water, by moving the unit for more than its equity position. Because today's consumer is armed with guidebook data, competitor's prices and can search inventory of dozens of dealerships with a few clicks of a mouse, that challenge has become more difficult.

Here's vAuto's value proposition. By knowing your inventory equity position on a per unit and daily basis, you can make acquisition, pricing, reconditioning, wholesale disposition and desking decisions armed with the critical information necessary to improve gross profit.

If you own a vehicle "right," the job of the used-car manager becomes easier. He knows how much he can spend to recondition it. He knows how much incentive he can offer the salesmen. It helps with determining trade-in values. A dealership's used vehicle inventory turn over the next 30 to 45 days can be accurately predicted by measuring its current equity.

Using your existing dealer management system and a Web-enabled cell phone or PC, our proprietary vAuto technology will enable you to come to manage your inventory portfolio on an equity basis. vAuto makes a promise to improve your gross profits and improve your equity. No contracts or commitments — the only requirement is a management philosophy dedicated to performance improvement.

Learn more or contact us today for a demo. 877-988-7648.