Industry Press release: Palo Alto, CA
The most productive reconditioning department runs like an assembly line, using defined processes, timed steps, and streamlined communications to produce more output, eliminate waste, and get buyers looking at cars online and on the lot five to 10 days sooner, notes Dennis McGinn, CEO of Rapid Recon time-to-market reconditioning workflow software.
Cutting even five days from this process flows directly to gross, according to NCM Associates, who through its 20 Group clients and moderator experts cites average dealership daily holding cost at $32 per vehicle, based on franchise and market area, says Paul Faletti, Jr. president and CEO of NCM Associates.
In other words, if a dealer’s average recon cycle is eight to 10 days, reducing it to a five-day cycle adds $96 to $160 in gross margin per vehicle retailed.
“Holding costs erode used car margins, so a faster time to market means more profitable used car operations,” McGinn says.
He offered these five tips to help used car and fixed operations managers work together more productively and shorten time-to-market:
Speed repair approvals: Improving communication between recon and the used car manager can reduce bottlenecks. Inability to get a work order approved by the used car manager can delay start of work from a few minutes to a few hours or more.
Set spend pre-approvals: Giving recon some level of authority to proceed with needed work without used car manager approval can keep work flowing uninterrupted. Consider assigning repair dollar “buckets” for vehicles of varying mileage – low, medium, high -- based on the mileage and repair averages of the vehicles you recon.
Structure phase times: Set a time frame for accomplishing specific types of work. Vary times based on the condition of the vehicle. Monitor times and hold staff accountable for adhering to them.
Compensate for vehicle completion time, not per vehicle: Focus compensation on a production-based measurement. A specified completion time window per vehicle will stimulate parties involved to work smarter and harder to move units through recon in fewer days. Consider spiffs for meeting goals; when considering spiffs, remember the larger picture – reducing holding costs, and turns that improve gross.
Equip for quality and manage by clock: Make no allowance for less quality work, but beware of tendencies to over-condition. The additional recon cost is rarely recouped and often contributes little to the vehicle’s sales-ability. Pay attention to visuals such as dings and dents, scuffed wheels, glass and other elements that attract buyers’ notice before any mechanical issues might.
In any market, time to market is critical. Dealership managers ignore time’s impact on profitability at a high price to the dealership.
Rapid Recon is the leading time-to-market reconditioning software for new and used car dealerships. Rapid Recon benchmarks and best practices help GMs, used car managers and service managers fine-tune their reconditioning practices to achieve faster time to market that helps retain vehicle gross.