You’ll get a range of responses when you ask dealers how much time it takes to recondition used vehicles.
The best-performing dealers these days consistently get the job done in 24 hours or less. Meanwhile, other dealers report their reconditioning turnaround times run seven days or more.
The disparity owes to two chief factors—the degree to which the dealer recognizes that time spent in reconditioning translates to lost front-end profit potential, and the extent to which a dealer implements and monitors processes that reflect the “time is money” reality of retailing used vehicles.
The following are five best practices I’ve gleaned from dealers who have transformed their reconditioning processes to minimize delays and maximize the profitability potential of every used vehicle:
1. Steer clear of problem cars at acquisition. This seems an obvious point, but some dealers and their buyers lose their acquisition discipline when they’re desperate to fill gaps in their used vehicle inventories. The result: They look past (or don’t check) AutoCheck, CARFAX and other condition reports, bringing home vehicles that require significant reconditioning work. The dynamic amounts to “throwing good money after bad” as they pony up for costly repairs that could have been avoided.
2. Determine each car’s exit strategy right away. This best practice goes hand-in-hand with the one noted above—that is, dealers should not be acquiring vehicles at auctions that lack the condition or market appeal (e.g., Market Days Supply) that indicate positive potential as retail units. Of course, trade-ins are a trickier prospect, especially if the dealership stepped up to acquire a unit and complete a retail deal. In these instances, dealers and their managers should collectively and quickly determine if a unit has retail potential. A best practice: Gather the appraisers and decision-makers once a day to review trade-ins and make the retail/wholesale determination.
3. Establish an “auto approval” for reconditioning work. This best practice helps minimize delays caused when a used vehicle manager cannot (or doesn’t) approve reconditioning work in a timely manner. Dealers who use this approach set up a baseline cost for reconditioning ($600 to $800 per car is common) and allow the service department to complete the work when estimates fall below the threshold. Some dealers resist this best practice out of a fear that their service department will “stitch up” the repair order to the maximum amount on every car. “That hasn’t been a problem at our dealership, but we monitor whether estimates match up with the final cost,” a Northeast dealer says.
At dealerships where buyers consistently check vehicle condition reports before purchasing a vehicle, about 10 percent of the incoming cars will require a manager’s OK because estimates exceed the baseline. In those cases, dealers use e-mail or text alerts to managers and expect a yea-or-nay decision in less than two hours.
4. Make reconditioning speed a priority. For some dealers, this means giving up on the tug-of-war with service directors and managers, who often regard customer pay work as a higher priority. In these stores, dealers will create a separate team (often a manager/writer, with up to five technicians, depending on volume) who focus solely on fast, yet thorough, reconditioning work. The manager’s compensation package typically emphasizes the need for efficiency and speed, with bonuses tied to meeting the store’s 24- to 72-hour reconditioning benchmark.
Other stores give the responsibility for managing reconditioning to the used vehicle manager. The manager then works collaboratively with his/her counterparts in service to craft and execute the processes that enable the dealership to recondition vehicles in an efficient and timely manner.
5. Look for ways to lower costs. Beyond profit-minded decisions that guide the scope of reconditioning work on individual vehicles, a growing number of dealers are examining their internal labor and parts costs to ease pressure on their front-end profit margins. These efforts often result in decisions to charge less-than-retail rates for labor, use lower-cost, non-OEM parts (e.g., brake pads, tires, wiper blades, etc.) and tighten their oversight of outside vendors who handle small dent/body, upholstery and window repairs.
These five best practices are solid steps dealers can take to help speed up the time it takes to get their vehicles to the front line. However, dealers should also recognize that, in today’s market, there are really two front lines—the physical and the virtual. The speed required to get vehicles to the physical front line should be measured in hours, and the virtual front line in minutes.
Some dealers wait until reconditioning is complete before they address the description, photos, pricing and other elements each unit requires to stand tall on the virtual front line. This is an operational no-no in today’s time-is-money environment.
In an upcoming post, I’ll show how dealers address this virtual front line challenge to maximize each unit’s sales and profitability potential.
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