05 Jul Two-Ingredient Recipe for Used Car Success
Used car profitability expert Jasen Rice helps dealers distill an ocean of inventory stocking and pricing data down to the basics needed to increase turn and margin. Recon evangelist Dennis McGinn preaches faster time-to-line disciplines, so cars hit the sales line fresher so they can sell more quickly for better margin.
Rice said dealers who prioritize stocking over reconditioning and online marketing, contrary to what many accept as gospel, cripples used car profitability.
While he agrees that stocking is important, he’s found that used car managers who prioritize fast reconditioning and then aggressive online marketing will sell cars faster and for more margin.
“We can get dealerships’ inventory cleaned up and moving, but then the next challenge is to keep the beast fed,” said Rice, who is the founder and chief executive officer of Lotpop inventory analysis services. “That’s recon’s role because if recon’s taking 10 or 15 days to get cars ready to be sold, those units are aged right out of the gate.”
McGinn, who along with Rice was recently interviewed at NADA, noted that recon data extracted from more than 1,300 dealerships proved that dealers using time-to-line (T2L) recon automation readily drop their previously long recon cycle times to a much more profitable three to five days.
“We’ve processed more than 5 million cars through our software and we know for a fact that dealers who lack T2L to organize recon lose $300 to $400 a car due to time lag and aging because of slow recon,” McGinn said.
“I can’t help dealers with that… that’s the missing link, and that’s where Rapid Recon focuses,” Rice said.
Because Lotpop is a proactive solution, Rice has personally witnessed the transformation rapid reconditioning and aggressive online marketing can have on a dealership. “We’re performing thousands of price checks a week, and we’re hands-on with customers across the country, pulling inventory data from their systems,” he said. “Many dealers don’t have the time or understanding to apply this information to their stocking and online marketing challenges, which is our sweet spot.”
Rice has found that Lotpop’s best-performing client stores sell 60 to 70 percent of their inventory within the first 30 days. “We know that’s where the gross is, but when these cars are coming out of recon as five-to-15-day-old cars, that’s where too many dealers struggle. It puts their ability to retail those vehicles for optimum margin at great risk,” he said.
Getting these dynamics right and in the proper order will help dealerships market more profitably in the continuing strong used car market. According to Cox Automotive, this April’s used car volume was up 3% over last year. As of early May 2019, estimated volume is 38.9 million units; year-end forecast at 39.5 million units and 39.2 million units next year, according to Cox Automotive’s May webinar, Riding the Tailwinds Behind the Used Car Market in 2019.
Used car managers who can easily access their essential business data recognize that smart leadership depends on understanding how time affects profitability — and then being intentional about using time to improve results.
“When it comes to recon, as Jasen pointed out, those managing the process need to know what the numbers are — you can’t fake this anymore,” McGinn said. “But when you organize the workflow and structure, its steps and work items by the clock, that ticking money-meter gets people to lift their heads out of the distracting noise they face and pay attention. Then, they communicate up and down the line, ‘Hey, this is important, and I am paying for it — and you pay attention to it too.’
“That’s why we work with experts like Jasen and Lotpop — to help dealers figure what they’re doing well, not doing well and then continue working with them to improve those processes.” McGinn said.
“And to control what they can control,” Rice interjected.
“Yes,” agreed McGinn. “Some stores we work with start off with T2L ranges of 10 to 21 days, which we help them work down to three to five days. And, for every 2.5 days shaved from T2L, the dealer adds another inventory turn. That means a lot of additional money to the dealership.”