You’ve just bought a number of vehicles at auction.
Now comes the hard part
– getting them back to the dealership and reconditioned quickly so they can be placed on the sales line.
That’s important because when it comes to used cars on your lot, time is literally money. Holding costs drain profit from every vehicle every day
– and it’s worse if you floorplan your purchases. The longer it takes to sell a car, the more interest you pay.
The good news is you have options that can help reduce the time from auction purchase to sale on the lot.
At the top of that list, NIADA retail 20 Groups moderator Justin Osburn said, is taking a close look at your recon process.
“The biggest mistake I see dealers make is how they organize their service departments,” he said. “If dealers outsource their reconditioning work, they have to get the vehicle to the shop and back. They have to get work approved.
“If they do the work in-house, they have to set a priority. Are vehicles that have to be reconditioned before going out on the lot the top priority? Or is it vehicles brought in by customers for repair?”
Osburn said auctions are pretty good at getting vehicles from the lane to the dealer, but once the dealer takes possession of the vehicle, everything is on the dealer’s head. And because the person in charge of reconditioning usually has a lot on his plate, it’s up
to the higher-ups within a dealership to make sure the work gets done in a timely fashion.
And that isn’t easy.
“If you use a reconditioning place, here’s what normally happens,” Osburn said. “At first Joe’s dealership is the place’s biggest customer and the service is great. Then the reconditioning shop gets comfortable with Joe and Joe’s business. He starts putting Joe’s vehicles on the back burner while trying to take care of his walk-in customers – who are also paying customers.
“It’s always a tug of war. If the reconditioner doesn’t focus on other customers, business is lost. If he doesn’t focus on Joe, he loses his biggest customer. There is no magic solution.”
With so many factors in play, Osburn said, dealers need to understand that to get their cars reconditioned quicker, they must work closely with those doing the reconditioning, whether that’s their own service department or a subcontractor.
“What hurts is when something
gets overlooked,” he said. “The best practice is to have someone in the shop look at the work. That might mean someone from the dealership visits the reconditioning shop every day if the volume of work dictates that. And that applies to the dealer’s own service center as well.”
Osburn said dealers also have to understand the more work a vehicle needs done, the more time it takes to get that work done.
“So a dealer must decide what level of reconditioning he or she is comfortable with,” he said. “We all want safe cars on the road, but there is a balance of how much reconditioning the dealer wants done. It’s a balance between cost of work and time it takes to get the work done.”
Finding that balance means making decisions. Which means someone must make those decisions.
“A lot of this seems simple,” Osburn said. “But there are a lot of decisions to make, and I’ve found even things that seem like small decisions require a lot of thought.”
One thing that makes that decision-making process easier, Osburn noted, is having a solid process in place that covers reconditioning.
According to Dennis McGinn, founder and CEO of Rapid Recon, having a reconditioning process in place requires a dealer to be organized.
McGinn’s company provides dealerships with software to help dealers keep track of the recon process.
“You have to manage the process from the moment a vehicle becomes an asset to a dealer,” said McGinn, a former Hewlett-Packard general sales manager who calls himself “a process guy.” He used that gift for processes to help a Lexus dealer he knew with his reconditioning issues – and a new business was born.
“I saw his system and felt it was dysfunctional,” McGinn said. “The time it took his dealership to complete reconditioning was a basic question, but no one knew the actual answer.”
McGinn said one thing many dealerships have in common is the target number for the time it takes to complete reconditioning and the actual number are often quite different.
Most dealers will tell you the optimum time is three or four days. But their actual time is closer to seven or eight days.
“I see that time and again,” McGinn said. “The only way to know the real time is to track every part of the process.”
That’s possible thanks to smartphones and tablets. Apps are now available that allow workers to press a button to indicate when their part of the reconditioning process is complete so dealers can track the process accurately.
While there can be resistance to using such a system, McGinn said it becomes less of a problem when people find out it actually can solve bottleneck issues and show they’ve done what they’re supposed to do.
“People want to do a good job,” McGinn said, “and having a system they can trust that shows they do a good job is something they like.”
If a dealer uses outside shops to do reconditioning work, that shop must sign on to the process, McGinn said.
Smit Shah, CEO of Simple Recon, said it’s very important for dealers to hold people accountable.
“Look, you can send a car to your service center or to your reconditioning guy and before you know it, they’ve had the vehicle for two weeks,” Shah said.
“No one does follow-up and the vehicle gets lost between the cracks. I once talked to a dealer who lost a vehicle for two months.”
All too often, Shah has seen dealers try to keep track of everything in their heads. While that might be possible for a very small dealership, it is clearly a bad idea for a larger operation.
Having everything on “paper” lets dealers track the process.
“Things have changed so much in the past five or 10 years,” Shah said. “The hardware and software available makes it easy for us to customize the reconditioning process to suit the dealer’s timetable.
“When I talk to dealerships about this, people who have skin in the game like GMs and owners love it because it gives them accurate data. A system is only as good as the data. For this to work, management has to support its use.”
And management has to understand what the data tells them.
Maybe things get backed up because there aren’t enough technicians. Or maybe it’s because there is too much recon that has to be done in the time the dealer has allotted.
“Managers can see how long it takes to get things done and they can track costs,” Shah said. “It’s my understanding that only about 4 percent of dealers use systems like mine. There is a lot of room for improvement.”
Another important thing to remember is dealers don’t have to do this alone. For example, today’s auto auctions offer all sorts of services for dealers who buy from their lanes.
Dealers get vehicles from a variety of sources, which is why having a recon process that can be tracked is important. But for vehicles purchased at auctions, often the simplest solution is to use auction’s services.
Major auctions like ADESA and Manheim, as well as many independent auctions, offer services to meet a dealer’s recon standards, including full service from start to finish. Which means once the vehicle leaves the auction’s hands it can be taken straight to the dealership and placed in the showroom.
Angie Babin, vice president of reconditioning for Cox Automotive – parent company of Manheim – said any sort of reconditioning a dealer wants done can get done.
“If you need the brakes done, the suspension checked, we can do it,” she said. “Change the tires? Not a problem. We can help with transport. We can even detail the vehicle for you, right down to cleaning the engine.
“The average dealer might use four to 10 vendors when having a car reconditioned. With us, it’s one-stop shopping.”
Costs vary, Babin said, which is why it’s important for a dealer to know what he or she wants done with the car.
Vehicles of different value might require different levels of reconditioning. A $50,000 car is worth spending $1,000 on. But for a $5,000 vehicle, it might make sense to spend only $200. “Some dealers like a car to look brand new when they sell it,” Babin said. “Others are happy to have a vehicle that looks nice, but maybe doesn’t look brand new. You have to know how much you want to spend in advance when you buy a car. It’s very important when determining your profit levels.”
Babin said the question she hears most often is how long the work will take. The answer depends on what kind of work is being done. The more reconditioning, the longer it takes.
It’s up to the individual dealer to set that timetable. Some might be happy with five days, while others are willing to wait 10.
Because turn time is so important, dealers should have a plan when going to the auction – and stick to it. They should know what they want to spend, not only on the cars they buy but on the recon, too.
Andrew De Bernardo, owner of State Automotive in Newburyport, Mass., said his background is in vehicle service, and one way he keep recon time down is by being selective with the vehicles he buys.
“I’ve been on the service side for 16 years and been selling used cars for two years,” De Bernardo said. “I’ve found I can make more money selling 10 cars than 50 by selling quality vehicles.”
He has relationships with franchise dealers who take vehicles in trade that have mileage too high for their used car operations. But, De Bernardo said, that doesn’t make them bad cars.
“They don’t want to take a big bath selling them at auction,” he said. “They’d rather take a smaller bath selling the vehicles tome.”
De Bernardo said he uses the same principle smart retail buyers use – check at the end of the month, when a dealer wants to get vehicles off the books,
but make sure they’re relatively good quality vehicles.
That keeps reconditioning costs down, and because the car doesn’t need as much recon, it hits the lot faster.
Bruce Walbert, general manager of Dean’s Auto Plaza in Hanover, Pa., said his dealership has its own service department that handles recon and repairs customers’ cars.
Walbert expects to spend about $700 in recon per vehicle –$600 for a car,$800 for a pickup and $1,000 for an SUV – so when the dealership buys a vehicle, those numbers are kept in mind. He said he also looks for vehicles that have current Pennsylvania inspection stickers. That makes it easier to get the car lot-ready because less work has to be done to it. By buying vehicles that don’t need a lot of work and setting a price range for the work that will be done, Dean’s Auto Plaza can get its vehicles on the lot fast and save a lot of trouble by avoiding purchases that will cost too much and take too long to fix.
Discipline in buying vehicles pays off. And don’t be afraid
to use vehicle history reports such as Carfax or AutoCheck. That results in fewer surprises – which is good, because surprises can add a lot of time to the recon process.
Ultimately, Osburn said, there is no hidden solution to quick turnaround. It all comes down to doing the basics well – tracking the recon process to make
sure vehicles are worked on in
a timely manner, buying the right cars for your dealership and having that criteria set in advance, working with vendors and knowing what you want to spend before you spend it.
It’s not glamorous, but in a business in which time really is money, those little things can make all the difference.