5 Steps to More Profitable Used Car Reconditioning | vAuto
It’s hard to believe that just a few months ago, people were lining up to buy used vehicles. You didn’t even have to fully recondition them to make a great sale. And delays in the recon process didn’t matter much because cars appreciated while they waited. So, if you’re like most dealers, you relaxed your entire approach to used car reconditioning.
But now with new car inventory on the rise and used car values falling, we’re officially feeling the used car hangover. No one knows where the market is headed, but it’s probably going to keep getting harder for you to make money this year. And that means it’s time to gain efficiencies wherever you can, starting with the foundation of all other inventory management processes: used car reconditioning. Streamlining your recon process is especially important if you’re still suffering from a lack of technicians or if you’re hoping to scale and grow your used car dealership.
Now is the time to fine-tune the recon process so it can help boost overall dealership performance no matter what happens with the market this year. Take these five steps to increase your recon profitability:
- Think of Recon as an Investment
Recon done right yields significant ROI.
Far too often, dealers think of recon as an additional cost — a necessary evil that must be minimized. But that’s just a reconditioning myth. Recon is actually an investment that can pay off in big ways for your dealership. The more you put into the process, the more you’ll get out of it. Spending a bit more by investing in new tires and other upgrades and valuable repairs can yield significantly higher profits when the reconditioned vehicles sell.
Recon pays off in customer loyalty, too.
Customers appreciate careful reconditioning efforts. In particular, budget-conscious buyers want to know what you’ve done to make a vehicle more reliable. So, don’t be afraid to share reconditioning details in person and online in your vehicle detail pages (VDPs). When you do recon right and customers understand the value, they stay loyal to your dealership. So really, when you put more time, effort and money into recon, you’re not just investing in the value of individual vehicles — you’re investing in your dealership’s success.
- Use Real Recon Estimates
Accurate cost estimates keep profitability on track.
Some dealerships set a standard estimate for recon and use this same number when calculating the profit potential for every car they acquire. Others make their best guess when estimating recon, without considering the full cost of repairs. Not surprisingly, these practices often yield wildly inaccurate estimates. In fact, according to a vAuto Podcast episode, there’s about a $600 difference between recon estimates and the true cost of the work. Discrepancies like this add up fast, negatively impacting your bottom line. It’s much more beneficial to your dealership to customize your estimated recon costs based on real vehicle assessments that consider the full scope of repairs needed. When your estimates are accurate, you stick to them and the numbers in your system reflect reality — ensuring that you always know how much you’re actually making on your cars.
Real recon estimates also help you acquire more vehicles.
Appraisers who use real recon estimates actually end up acquiring twice as many cars as those who use standard estimates.* It’s easy to feel more confident taking on vehicles when you know the true cost of getting them front-line ready. This confidence is especially helpful in overcoming today’s ongoing inventory shortages. You might be more willing to buy a car that needs more repair work if you know how much that work will really cost you — and that it’s an investment worth making.
- Prioritize Recon Based on Dealership Needs
Working in the optimal order yields optimal profit.
Some used car dealerships move vehicles through the recon process in the order in which they are acquired. But this “first in, first out” approach isn’t always the best because some cars need to sell faster than others to realize their full profit potential. And sometimes you know a customer is waiting for a specific vehicle, and they’ll buy it from you as long as you can get it ready for them faster than the dealership down the street. So, when prioritizing vehicles for recon, you should consider their shelf life as well as your inventory needs and your available resources for completing repairs. Keep the recon process moving in the order that’s best for business.
- Ensure Recon Efficiency With Recon Software
Used car software improves the recon process.
Some dealers still use manual processes to manage their used car reconditioning process. But because recon often involves many participants, including outside resources, vehicles in need of repair can easily get forgotten on the lot. That’s why many dealers have started using used car software solutions to help manage the process.
iRecon used car software improves workflow efficiency.
vAuto has developed a recon software solution, iRecon, to improve your time-to-market by helping you identify and avoid costly delays in your recon process. iRecon has helped dealers across the country drive greater profit through a more efficient recon process. Plus, vAuto Performance Managers offer teams process-building suggestions that lead to better behaviors and better outcomes — which is helpful for reestablishing a sense of accountability after a period of relaxed recon practices.
- Do the Math
The numbers prove the impact of recon on profitability.
Increasing the efficiency of your recon process really does help boost the bottom line in used car dealership operations. vAuto has built an ROI calculator to help you visualize the impact of our recon software on profits. Just input a few average figures: monthly inventory, vehicle sales, profit per vehicle, and your current and target recon timelines. Then see how the software impacts selling days per vehicle, monthly turns, and your monthly and annual profit. Use this calculator when discussing and considering software investments and recon process improvements at your dealership.
In these uncertain times, it’s hard to feel confident about your used car dealership operations. But you can feel confident that improving your recon process will positively impact your profitability, regardless of market conditions. With that knowledge, now is the time to take action to improve the way you think about recon and how you estimate costs and move vehicles through the process. If you have questions about the best approach to recon or how iRecon software can improve your bottom line, please just contact us. Our team will be happy to help.
*Based on Cox Automotive Provision® data from March 2022 through June 2022.