Mike Boyd

Growing up in a military-minded family, I learned to always have a plan before I act, and that there is a very real difference between negligence and an accident and that most people confuse them. This mindset became especially useful to me when it came to maintaining efficiency at my dealership.

If I could identify opportunities and create a process to keep all three dealership pillars — acquisition, reconditioning, merchandising — operating fluidly, we could reach our highest potential. We would, in fact, be able to create and take advantage of additional opportunities that arise because of these efficient processes.

It all starts with the appraisal

An appraisal is an educated opinion, using data tempered with experience to come up with the valuation of a car as it sits, in the condition it is in today. But there is an even more important piece of data dealerships do not factor in enough. And that is: How long will it take for my store, with our available resources, to get this vehicle through the reconditioning process, and what will it truly cost us to get the vehicle to reach its true profit potential?

Using appraisal notes, pictures and reconditioning items, you can understand the full potential of a vehicle

A proper appraisal is a reconditioning plan. It will lay out the expectations of the jobs to be done, the expected costs to do it and the value left, which is the appraised value. The market controls the retail price, but you can control the cost of doing business and your true speed-to-market by properly identifying the cost / benefit of reconditioning a car.

Most dealerships operate under the belief that a 40% “Look to Book” (LTB) is a great number. vAuto insights tell us that 50–60% is the right range. I personally believe that anything less than winning 100% of the cars you appraise creates an opportunity to improve. I would challenge you to do a few things:

  • Separate the overall LTB average by appraiser. Then look at the quality and quantity of each appraiser’s work. Ask and answer these questions:
    1. What do their appraisals look like?
    2. Are there descriptive notes, are there pictures, and can you get a clear understanding of what will be needed to recondition this vehicle to your store’s standards?
    3. Does the appraiser even understand what it takes or the time it takes to get a car retail-ready at your store?

Look at all the vehicles your dealership appraises — there is a story there. Find all commonalities and irregularities. Think “Moneyball,” the story of the Oakland A’s 2002 season and how their general manager Billy Beane created a winning team using sabermetrics (in-game activity) to put the right person in the right place at the right time.

Every appraisal is an “at-bat” to count and review

Review the practice and game tapes (previous appraisals) and work on the appraiser’s technique on a regular basis. There should not be huge variances in LTB among appraisers, and if there is, let’s figure out why and either train up or trade up.

You simply cannot afford misses on appraisals

Imagine how much more effective your appraisal and reconditioning process would be if you actively measured what the appraiser said they expected to spend in reconditioning versus what the final cost was. How many more cars would you buy or cars would you take in trade if you had an additional $500 per trade? The beauty is that $500 doesn’t lower your profit potential — it increases it.

Oh, and that extra day or two it used to take to get a car’s recon process started can be eliminated. Recon can now begin on Day One because no one needs to go back out and re-inspect the car. All the necessary information to start a reconditioning plan was entered by the appraiser. After all, reconditioning starts at the appraisal.

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