Category Archives: Used Vehicle Department

Your Prices May Scare ‘Em Off

Does your dealership have a retail-pricing policy, or do you just hope the pre-owned department uses good judgment to not scare off an owner base you spent years and dollars developing?

I may be biased toward retail-pricing policies, but it is a real concern. You see, the Internet has changed the advertising landscape and is in the process of changing the long-held concepts of location.

While location, location, location, is critical in real estate, and while it used to be critical in retail automotive, the latter is changing.

The Internet user has the ability to bypass all locations that may offer a vehicle on his or her shopping list if those locations don’t offer competitive pricing on those vehicles.

What this means is the age-old concept of pricing vehicles extra high so that you can come down when negotiating is becoming obsolete.

Believe me, I had a hard time overcoming my age-old bias in favor of this practice; a bias I held at least until I witnessed first-hand what an outdated pricing policy does to a used-car department’s floor traffic, incoming phone calls and Internet hits.

For years, one of the most prestigious marketing consulting companies has always seemed to determine that location was among the top three most important drivers of floor traffic, possibly the most important driver.

This has held true in the new-vehicle department as well as the pre-owned department for as long as I can remember.

By the way, these studies were and are expensive, yet dealers continue to pay what may seem to be outrageous amounts of money to be told that location is a top draw of prospective customers to shop them.

No doubt, in years past this was true. But it is changing and may be changed forever by the Internet.

Don’t misunderstand me. I am not suggesting that location isn’t important. In fact, it is still the source of most traffic in the pre-owned department and likely will continue to be for many years.

It’s just that it isn’t as important as it once was.

Many Internet users will still shop for a good price and continue to give you an opportunity to adjust your pricing to meet their expectations if they visit your store. But why should you, or would you, take the chance that they might not give you the benefit of the doubt and not visit your store.

If you have reason to question the importance of a dealership controlled pricing policy, just ask yourself: “Am I having more difficulty in generating floor traffic or am I having more difficulty in negotiating an agreeable price after the prospect comes to my dealership?”

If you are having more difficulty in generating sufficient floor traffic, check your pricing model to see if it is a reason for the poor traffic.

To check that, all you do is take a recent month’s retail deals and compare the original asking price vs. the final negotiated selling price. This should include an over-allowance or an under-allowance, if there is a trade.

If the spread is more than $1,000, then you may be costing yourself some floor traffic and volume. If you find that, you may be simply adjust your retail pricing to a more market-based pricing model.

Forget what any books or references say the price should be. Using any of the Internet based tools available, verify that all of your inventory is priced competitively in your market.

Cars.com and AutoTrader.com are two examples. Local newspapers can also be used as a good reference for retail pricing comparisons; that is, if your print ad prices are consistent with your Internet prices.

If your print pricing is not consistent with your Internet pricing, you should then check your on-lot pricing. If you find that all three of the prices are not consistent, it’s time for a managers’ meeting.
____________________________________________________________________________________________________

Ed Curry is director of pre-owned operations for NCM in-house training and consulting. He can be reached at ecurry@ncm20.com.

When Enough is Enough

How much is too much to pay for a vehicle? This is one of the biggest dilemmas facing dealers and managers when deciding how high to go on a vehicle that they “need” to own. And this question arises both in the showroom when doing appraisals as well as in the auction lane when bidding for vehicles.

In the past, when you came upon an eye-popping, sharp vehicle, the common wisdom was to pay what you needed to pay to own the vehicle. This is because you knew that regardless of what you paid for a desirable vehicle, you could always expect to make an acceptable gross profit by tacking a $3,000-$5,000 markup on top of your cost. This approach yielded consistent results in the days when the used car market lacked transparency and consumers didn’t have access to the Internet telling them where other similar vehicles were and at what prices. In such cases, you had the luxury of saying to shoppers, “This is a one-of-a-kind car and you will never find another one like it.” Today, the Internet makes it very easy for shoppers to know the prices and locations of other similar vehicles. You simply can no longer rely on the “one-of-a-kind strategy” to induce shoppers to pay more than they need to. While I am not saying that vehicles that have special, aesthetic appeal aren’t more valuable than others, I think you all know that there is a point when you need to say enough is enough.

So, if the Internet has created a more efficient market where buyers and sellers have relatively equal knowledge of choices, alternatives and values, you must take a different approach other than paying whatever is needed to acquire a vehicle. The new approach begins with the awareness that every single vehicle has competitors in its local market which are similarly equipped and equally desirable. You must recognize that shoppers will most likely discover these alternatives and weigh them against your offerings. This leads to the inevitable realization that you cannot depend on making acceptable margins if you price your vehicles above the competition. If you do so, shoppers will not show up on your lots, or if they do, they will leave your showroom in favor of more attractively priced, comparable vehicles they know exist elsewhere. You must, therefore price with an eye to the market, a concept that I refer to as pricing to market.

If you accept the premise that your vehicles have to be priced in line with the market, then you arrive at the realization that your gross profit margin is almost entirely dependent on the vehicle’s acquisition cost. Most experienced used car managers have long understood the principle that the profit was largely made on the buy. In the past, however, when consumers didn’t have knowledge of available choices, alternatives and values, you also had the opportunity to make profit by charging higher prices than actually needed to be paid if the buyer had only known better. But now that buyers know all too well about alternative choices, the statement that the profit is made on the buy is more true than ever. You simply cannot expect to make target margins by charging prices that are over market.

Therefore, you need a new strategy for making gross profit, and the one that I propose is purchasing to margin. Purchasing to margin means that before you purchase any vehicle, you need to understand your options for getting out of that vehicle based on the realities of your market. Specifically, you need to know how many comparably equipped vehicles are currently available for purchase in your market, as well as their average retail market price. With this information you can calculate a strategy for “getting out” before you get in.

For example, let’s say that you are appraising a vehicle in your showroom that has 12 identically equipped vehicles just like it for sale in your market, with mileage adjusted prices as represented in the list below. Further, let’s say that the vehicle you are thinking about buying has an average days supply in your market of 100 days. How would you need to position your vehicle in this market in order to attract a buyer? I would suggest that you need to be in the “top third” with respect to mileage-adjusted price. Knowing your dealership’s profit objective is $2,500 and your standard recon is $1,000, you would need to appraise the vehicle for $12,000 to attract a buyer at approximately $15,500.

Identically Equipped Vehicles Available for Sale
$14,870
$15,214
$15,230
$15,400
$15,899 $15,500
$16,005
$16,135
$16,380
$16,430
$16,679
$16,965
$16,907

The problem, however, is that oftentimes you have a customer in your showroom demanding $13,500 of real money to do business with you. Before you say yes or no to $13,500, you need to calculate what your likely margin would be if you make the deal. At this higher acquisition cost and with recon, you would now own this vehicle at $14,500 and only have a profit margin of $1,000 if you wanted to price your car to sell. In the past, bumping the appraisal wasn’t too much of a problem because you were still able to make your $2,500 margin by pricing the car higher. Today, however, as described above this strategy will fail. You must accept the fact that to be positioned competitively to attract a buyer, your margin will only be $1,000. If you are not satisfied with putting $14,500 at risk to make a $1,000 profit, then you should feel okay about handing this deal over to your competitor. If you are not willing to let the deal go, then you can go ahead with the transaction, but do so with your eyes wide open.

Employing a pricing to margin strategy will only work if you are able to avoid the most common pitfalls. In the fairy tale “Hansel and Gretel,” two children ventured into the forest leaving behind a trail of breadcrumbs in order to find their way home. Hansel and Gretel believed that it was all right to venture into the forest if and only if they had “an exit strategy.” They tried to “know how to get out before they got in.” But in the case of Hansel and Gretel, their strategy failed. Their breadcrumbs were eaten by hungry birds and forest animals, leaving them lost deep in the forest. In dealerships, you are also prone to losing your way once you have ventured deep into the forest. Your problem, however, is not hungry birds and animals, but rather the habits of your past. For many years, you have been rewarded with strong profits in the used car department despite having overpaid for vehicles, such that it is still tempting to do so. But because consumers are no longer likely to help you, you will find yourself stranded deep in the forest, without a way to get out if you are not disciplined in your approach.

If you keep the principles of pricing to market and purchasing to margin in mind, you will always know how to get out of a car before you get in. Also, and most importantly, you will know what getting out of a vehicle means with respect to profit and loss. This approach is entirely realistic and necessary and it is currently being used by many of the most successful dealers in our country. Technology has advanced to a point where there is now information available about the actual retail market. In addition, tools are available to model various existing strategies and their implied profit margins. Hansel and Gretel may have only had breadcrumbs but you have access to far more sophisticated products that you absolutely must use in today’s market.
____________________________________________________________________________________________________

Drawing from 13 years experience as a dealer principal and eight years as a successful high technology executive serving the automotive retail industry, Dale Pollak is an authority on maximizing dealership profits from pre-owned vehicle operations. Pollak is the founder and chairman of the board of vAuto, Inc. a pre-owned inventory management solutions company.

Why Have A 60-Day Used Vehicle Turn Policy

Many dealers and used car managers wrestle with the length of time to keep a used vehicle on the lot. If the used car manager is paid on wholesale profit and loss, it becomes difficult to wholesale anything at a loss. Allow me to explain why this is a mistake and show you how taking that loss will actually make a profit.

Let’s take the average priced vehicle over 60 days old. When it came in to stock at ABC Motors, it was valued at $13,000. We can presume it was worth every penny of $13,000.

After 30 days, it is still probably worth 98 percent, or $12,740. That isn’t anything to worry about; it can still be retailed to make all the money.

After 60 days, it is probably now worth 95 percent of the original appraisal, or $12,350. If we retail out of it, no problem.

After 90 days, it is worth maybe 90 percent, just $11,700. If we were to wholesale it now, we would lose more than $1,000. So, let’s keep it and hope we retail it; after all we could retail it for the original appraisal and still break even.

On the contrary, it stays around and before we know it, the vehicle is 150 days old, and we would be lucky to wholesale it for $10,000. We certainly don’t want to lose $3,000, so we keep hold of it and continue to hope to retail it.

Now we have every salesperson walking around aged inventory, and it becomes a lot fixture. We can’t possibly wholesale it now without losing a fortune, so here it stays.

Let’s go back to 60 days. If we have a policy in place to turn every vehicle at the 60-day mark, we would wholesale this vehicle and lose $650.

However, we still think there is a chance to retail it, so we hang on to it for another 30 days. Now, we are 30 days over our current policy (a total of 90 days), so we have to move it. It is wholesaled, and we take $11,700 for it. On the face of it, we lose $1,300. On the other hand, that has freed up used vehicle inventory money that we can reinvest in a fresh, exciting piece of inventory. Now, we have a new vehicle that salespeople and customers are excited about. If you don’t think customers know what is new on your lot and what has been there for a while, think again!

This new vehicle sells within 30 days and returns our average profit of $1,875 plus F&I. From our original $13,000 vehicle we have made $575 plus F&I, ($1,875 profit minus the $1,300 wholesale loss), and we have our $13,000 back to invest in another fresh piece.

We again invest in more inventory and sell the second vehicle within the next 30 days, returning another average profit of $1,875 plus F&I. Total profit returned is $2,750 plus F&I on two retailed vehicles in 150 days.

If we had held on to the original vehicle for 150 days, we would be faced with about a $3,000 loss and would not have had two new customers on our books. A 60-day policy made a difference of over $5,750 extra profit (the $2750 profit we wouldn’t have seen plus the $3000 loss you didn’t report because your policy forced you to wholesale much sooner). Multiply that by the number of vehicles you have in stock over 150 days.

The reality is that the profit on a fresh vehicle is more than the average, which makes these numbers even greater. Also, your customers will notice your inventory with a 60-day turn policy in place and stay interested. They will know that if they are interested in one of your used vehicles, they better act quickly because the used vehicles at ABC Motors don’t stay on their lot for long.

On the contrary, it stays around and before we know it, the vehicle is 150 days old, and we would be lucky to wholesale it for $10,000. We certainly don’t want to lose $3,000, so we keep hold of it and continue to hope to retail it.

Now we have every salesperson walking around aged inventory, and it becomes a lot fixture. We can’t possibly wholesale it now without losing a fortune, so here it stays.

Let’s go back to 60 days. If we have a policy in place to turn every vehicle at the 60-day mark, we would wholesale this vehicle and lose $650.

However, we still think there is a chance to retail it, so we hang on to it for another 30 days. Now, we are 30 days over our current policy (a total of 90 days), so we have to move it. It is wholesaled, and we take $11,700 for it. On the face of it, we lose $1,300. On the other hand, that has freed up used vehicle inventory money that we can reinvest in a fresh, exciting piece of inventory. Now, we have a new vehicle that salespeople and customers are excited about. If you don’t think customers know what is new on your lot and what has been there for a while, think again!

This new vehicle sells within 30 days and returns our average profit of $1,875 plus F&I. From our original $13,000 vehicle we have made $575 plus F&I, ($1,875 profit minus the $1,300 wholesale loss), and we have our $13,000 back to invest in another fresh piece.

We again invest in more inventory and sell the second vehicle within the next 30 days, returning another average profit of $1,875 plus F&I. Total profit returned is $2,750 plus F&I on two retailed vehicles in 150 days.

If we had held on to the original vehicle for 150 days, we would be faced with about a $3,000 loss and would not have had two new customers on our books. A 60-day policy made a difference of over $5,750 extra profit (the $2750 profit we wouldn’t have seen plus the $3000 loss you didn’t report because your policy forced you to wholesale much sooner). Multiply that by the number of vehicles you have in stock over 150 days.

The reality is that the profit on a fresh vehicle is more than the average, which makes these numbers even greater. Also, your customers will notice your inventory with a 60-day turn policy in place and stay interested. They will know that if they are interested in one of your used vehicles, they better act quickly because the used vehicles at ABC Motors don’t stay on their lot for long.
___________________________________________________________________________________________________________

Written by Michael Rees, CEO
DealerPro Sales and F&I Solutions
MRees@AutoDealerMonthly.com

Why Traditional Dealers Miss the Mark

Recently, I spoke at a 20 group of dealers in Chicago. The moderator started the meeting by asking each attendee to state the most significant challenge facing their used vehicle department. One attendee after another cited the same two problems: lack of showroom traffic and the inability to attract and keep salespeople. At first, these two recurring themes seemed to be distinct, but then it occurred to me that they might be symptomatic of a common problem. Why is it difficult for dealers around America to attract people, whether they are shoppers or sales employees?

While the discussion in the room centered on new approaches to advertising and pay programs, I came to the conclusion that as an industry we are not addressing the root cause of our problem. I believe there is one reason most traditional dealers are finding it difficult to attract shoppers and employees: our basic business model is broken. After all, the used car superstores are not struggling to attract customers and retain salespeople in the same way as traditional dealers.

So who are the superstores and how do they succeed? This question bears so much importance that I’ve devoted an entire workshop to answering it at the 2008 NADA Convention in San Francisco. But in short, the “used car superstores” are those who recognize and address the realities of the “new” used car business.

Let’s take a step back. Although used vehicle sales transactions are more robust than ever, our lots are quiet. In the past, used vehicle shoppers would regularly visit dealerships to “walk the inventory.” If the didn’t find a vehicle they liked, they proceeded to the next dealership. This traditional form of used vehicle shopping kept our lots and salespeople busy. The customer’s shopping ritual created an atmosphere of action, productivity and, at its high point, it occasionally created a frenzy of activity.

Today, however, people consider their time to be more valuable and given the ease and the efficiency of the Internet, there is just no need to physically walk the lots to identify a suitable vehicle. While there is an equal or greater amount of used vehicle shopping occurring each day, it is being done in the virtual, rather than the physical realm.

This means the dealership’s front line, facility, and location are no longer the primary drivers of traffic and sales. Today, the Internet is the staging ground that directs traffic to dealerships that possess the skills to win the shopper’s attention. Interestingly, these new skills that make the phone ring and the doors swing are ones that are often relegated to third parties, porters, and new employees. While dealer principals and experienced managers are keenly aware of their facility’s condition and the orderliness of their front lines, they are often oblivious to their appearance on the Internet. Examples include poor quality photos of vehicles as well as vehicle’s descriptions highlighting insignificant features such as power steering, power brakes, and even cup holders. Most egregiously, dealerships price the majority of their inventory $3,000-$5,000 higher than competing vehicles with comparable miles and equipment. When viewed from the perspective of an Internet shopper, it is no wonder why some dealerships fail to see or hear from shoppers considering vehicles like the ones they own.

The changes created by the Internet have left most dealers wondering why their showrooms are quiet, while simultaneously allowing a relatively few number of dealers to feast on the fruits of their effective Internet strategies. Ironically, the dealerships that have the less desirable locations, facilities, and brands seem to be enjoying more telephone and foot traffic as a result of the Internet. This is largely because of necessity. These dealers have learned that if used properly, the Internet is the great equalizer that is capable of bringing giants to their knees. Alternatively, what were once the most successful dealers, with the best brands, locations, and facilities are the last ones to figure this out because they simply didn’t have to. This is validated when I visit dealerships with no particular distinction of brand, location, or market that consistently produce used vehicle production of 70, 80, 90, or even 100 retail sales units each month.

So the answer to the showroom traffic problem just comes down to the difference between those who get it and those who don’t. In other words, those who understand that traditional merchandising or advertising tactics won’t solve this problem are the ones who get it and who are winning at the expense of those who are still relying on the traditional sales model.

With the persistence of this broken merchandising model, we get our first clue as to why it is difficult to attract and retain talented individuals to work in our showrooms. Who would want to pursue a career selling products to consumers who seldom show up? Moreover, who would work on a commission basis selling products that can readily be compared to identical vehicles being sold for less? Additionally, there is now little appeal in today’s Internet era to haggle or negotiate. The Internet has bred a culture where the art and desirability of negotiation has become a relic of the past.
Despite these realities, we continue to write new ads, create new compensation programs, and even hold job fairs to attract people to do something that no one wants to do or can do well.

On the other hand, operations like CarMax and other emerging rivals are far exceeding the traffic of their traditional dealer counterparts. They are also demonstrating an ability to attract and retain sales professionals in abundance.

The basic secret that defines the superstore model is recognition of and the ability to execute essential Internet merchandising strategies. The centerpiece of their new and more effective Internet strategies is efficient pricing. These stores have learned that efficient pricing is the key contributor to increasing traffic as well as solving the salesperson challenge.

Specifically, two phenomenal things happen when vehicles are properly merchandised and priced on the Internet. The first is that people show up quickly and in large numbers. The Internet is an extremely effective medium that rewards dealers that price more competitively at the expense of dealers who do not. The second occurs more slowly, but with no less certainty. People that show up will negotiate less and, in some cases, not at all. This is because they have already satisfied themselves that they have found a fair value.

These two phenomena create positive effects for both the dealership and sales personnel. For the dealership, traffic and sales improve. This inevitably leads to higher total gross profit and the opportunity for additional sales of financing, insurance, and related products. Also, over time dealerships find that their variable selling expense is as much as 20 to 25 percent less than their traditional dealer counterpart. This is because they are able to hire and retain sales personnel that do not need to possess the same level or in some cases, any, negotiation skills. Such individuals are less expensive, easier to hire, and easier to retain.

From the perspective of the salespeople, the superstore environment is livelier and upbeat. These individuals consider themselves as product specialists, rather than used car salespeople. Simply stated, these superstores have redefined the job to be one that is highly appealing to a mass of Americans.

While there are many additional key lessons to be learned from the successful superstore, make no mistake that these operations have created a new model that is proving successful in creating greater traffic and more desirable employment opportunities. Perhaps the greatest endorsement of this new model came late last year when the iconic Wall Street investor Warren Buffet took an initial 6 percent stake in CarMax. Warren Buffet’s reputation for identifying and investing in companies whose business models are superior to those of their peers is unparalleled. I believe we all must invest the time necessary to understand the new model for used vehicle sales if we want to be successful.
_____________________________________________________________________________________________________

Drawing from 13 years experience as a dealer principal and eight years as a successful high technology executive serving the automotive retail industry, Dale Pollak is an authority on maximizing dealership profits from pre-owned vehicle operations. Pollak is the founder and chairman of the board of vAuto, Inc. a pre-owned inventory management solutions company.

You Need to Know What’s Wrong

What would happen at a dealership if a particular used car had many interested shoppers and multiple demo rides, but still didn’t sell? The obvious answer is that someone would go out and carefully inspect the vehicle to determine what the heck was wrong with it. Perhaps it smelled like smoke, needed a wheel alignment or a tune-up. There would likely be something that isn’t right about the vehicle and, most likely, if the problem were corrected, the vehicle would sell.

Now, what would happen if a particular vehicle got a lot of online shoppers looking at it, clicking through many times for complete details and photos, yet no one was taking the next step – to print the page, or print a map to the dealership, or clicking to request additional information from the dealership? Would there be something likely wrong with how the vehicle is displayed online? Again, the obvious answer is yes, most likely.

The difference between these two scenarios, however, is that it’s highly unlikely that anyone at the dealership is actually aware of how much attention any given vehicle is attracting on the Internet. Unlike your physical display, your virtual display and its associated shoppers are largely “out of the view” of dealership personnel.

To be sure, every dealer has many vehicles that come up frequently in vehicle searches, get clicked on repeatedly for details and yet draw few, if any, customers willing to “take it to the next step.” I think that this phenomenon occurs all too often and goes unaddressed because no one at the dealership is evaluating their virtual lot in the same way that they evaluate their physical lot.

This is particularly disturbing because most major third-party sites provide dealers with the ability to view the number of searches and detail views for each of their vehicles. Moreover, they also report the number of times that a shopper has “gone to the next level” to indicate purchase intent like printing the page, printing a map, or clicking to request more information. There are also inventory management tools that also report this activity.

I think it is imperative that every dealership begins to routinely access and track this relevant merchandising information to determine why certain vehicles get a lot of attention, but very little action. Sorting vehicles using the tools referenced above can easily do this, high to low based on the number of detail page views. Highlight the vehicles that get a lot of detail page views, but little or no page prints, map prints, and/or e-mail requests for additional information. This is all measurable information that is critical to know in order to act upon. For example, perhaps the photos are poor or non-existent. Similarly, the description may be missing or fail to highlight what makes the vehicle unique. Taking corrective action quickly will certainly result in increased traffic and sales. Make no mistake – it is a given that if you take the time to evaluate and act on “what’s wrong,” you’ll improve your online merchandising results.
_________________________________________________________________________________________________________

Drawing from 13 years experience as a dealer principal and eight years as a successful high technology executive serving the automotive retail industry, Dale Pollak is an authority on maximizing dealership profits from pre-owned vehicle operations. Pollak is the founder and chairman of the board of vAuto, Inc. a pre-owned inventory management solutions company.

What in the World are you Thinking?

As we have watched gas prices skyrocket there is an important lesson to be learned. There couldn’t be any environment that more dramatically highlights the theory that dealer’s stocking based on their “core inventory” is just plain wrong. If any dealer today stocked their lot based on their past core inventory, they’d be purchasing gas guzzlers and, quite possibly, avoiding the purchase of today’s hot selling, gas-sipping vehicles.

We are now seeing reports of both Ford and GM shutting down manufacturing plants that build their large SUVs and pickup trucks, and shifting production to more fuel-efficient models. What if Ford and GM were, instead, using the same philosophy that some companies are promoting to dealers for their used vehicle stocking? In other words, what if Ford and GM kept producing and stocking their dealers with “core inventory,” (i.e., lots of trucks and SUVs)? They and their dealers would be guilty of the worst management malpractice imaginable.

Today, I spoke to a highly successful used car director of a large multi-franchise organization. His comments made me realize that the absurdity of “core inventory” goes well beyond the issue of gas prices. He said that, as an experiment, they stopped stocking used Infinitis at their Infiniti dealership. They experimented with high volume, off-brand vehicles, such as Impalas and Malibus. I asked him if he was sure he knew what he was doing, and he told me that they were selling like “hotcakes.”

He said that we all get hung up on the notion that we should stock according to our past sales and/or in accordance with, our franchise brand. Yes, it may be true, he told me, that there is some natural traffic for these vehicles, but that does not necessarily mean that they are the most demanded products in the market. Properly used, the Internet allows dealers to be successful with products that are hot, but not necessarily their brand or part of their past core. Remember, he said, that no used car manager ever got fired for not selling the right mix of used makes and models.

So why is it hard for many dealerships to do what my friend has done at his Infiniti store? I think that the answer lies in the fact that we are all more comfortable operating in a zone of comfort and familiarity. Think about how hard it would be for someone very knowledgeable and familiar with Infinitis to say, “There might be something better out there, and I’m gonna give it a try.” It must have been really hard for that Infiniti manager to go out and pull the trigger and buy a bunch of Impalas and Malibus. It would be like waking up one day and putting your watch on your other wrist and deciding to part your hair on the other side. It’s just really hard to do! So we don’t do it, even if there’s a chance that it might work out better. It’s a lot easier for us to go with the inventory that we know, rather than venturing out and taking the risk associated with buying something different.

The good news for the industry is that there is now technology that can analyze any market and tell a manager, at the level of year, make, model and specific equipment, which are the hottest vehicles at the moment, based on volume and/or gross. It can even show you where to go to buy those vehicles. This takes much of the risk and uncertainty out of the equation. So if you haven’t seen this, you need to. In my opinion, it’s the only way to stay in tune with the market. And, to those that continue to advocate the message of “core” I say, “What in the world are you thinking?”
_______________________________________________________________________________________________________________

Drawing from 13 years experience as a dealer principal and eight years as a successful high technology executive serving the automotive retail industry, Dale Pollak is an authority on maximizing dealership profits from pre-owned vehicle operations. Pollak is the founder and chairman of the board of vAuto, Inc. a pre-owned inventory management solutions company.

What Kind of Used Car Buyers Are You Dealing With?

Used car shoppers all agree that doing your research online is a must. Dealer websites, photos, videos, mileage figures, reviews, CARFAX history reports…they will seek all the major resources. Even turning to friends, family and even the guy down the hall at work who claims to know everything.

The major difference between all shoppers is how this information is processed and actually absorbed. Many buyers will tell you what they want and how much research they did. But did they?

Most car buyers eventually buy something that is closer to what they want rather than what they need. I’ve done it. I blame it on Maslow.

Shoppers need to use the resources available to make the best choice rather than just taking the easy route and selecting the familiar choices. I see a striking similarity in the the choices automotive shoppers make and the decisions voters make. And those choices tend to be based on comfort versus the decision that actually shares their current needs and situation.

Rational Buyers:

These are your car geeks. They know everything about the vehicle. Cubic square inches of the engine, drag coefficients and the entire family history of the founder of the company. Their knowledge overtakes their ability to clearly decide when comparing models side by side. Just like voting, they revert to a confused state and may even make the wrong choice.

Passive Buyers:

These buyers don’t pay attention to a specific model or even their specs – aside from price. Their decisions are based more on what they remember from an emotional commercial, a memorable event from their youth or even the overbearing influence from an older Rational Buyer. Again, like voters, very little consideration is given to the alternatives. These are the buyers OEM’s love; they like to call it brand loyalty. I call it lazy and close-minded

Frugal Buyers:

The Frugal consumer concentrates on one specific item they have justified as the most important item and becomes passionate about that fact. Any additional logical information that could influence their decision is disregarded as false, stupid or even as a conspiracy theory. These are emotional people. Rational thoughts are not an option as these buyers are operating on their own agenda. If the frugal buyer’s hot button is purchasing the vehicle with highest safety rating, any other piece of information will be met with resistance. I also recommend not discussing anything about religion, politics or popular culture as it will not end peacefully.

Intuitive Buyers:

These are pleasant buyers who did what they consider to be sufficient enough research. They could sound like a Wikipedia page, but share only enough to appear as if they are being humble about their “knowledge.” Their effort behind the actual research is minimal; they aren’t overly committed to one particular brand – often flip-flopping and not paying attention to all of the information. They may be interested in the safety endorsement from the NHSTB. Or just the economy ratings from FuelEconomy.gov. Once the key information is found, their decision is made based on the perceived endorsement from that group.
______________________________________________________________________________________________________________________

Written by Eric Miltsch

What’s My Car Worth (Handling Trade-Ins)

I was recently at a family reunion and realized, again, how knowledgeable and wise my senior family members are. If you’re under 50, you’re still considered one of the kids. The reason I’m mentioning this is because I was having a discussion about some of the new things out in today’s market and then my uncle flared up and said "Do you younger people think you invented everything?" He with several others started rhyming off a list of things that I thought were new but evidently have been around for a long time. The list had nothing to with computer stuff, mostly trends and patterns. The things they were saying made me feel foolish, as if younger people thought of and invented everything. It made me think about why some businesses and sales people do exceptional and some fail. There are many advantages to life experiences, age and wisdom. I have always had a great respect for anyone that is older than I, but now I have an even greater respect. My grandmother is ninety years young and always says, “this is the best meal I have ever had,”; “this has to the best party I’ve ever been too,”; “you look like you’ve lost weight?”; “that is a nice shirt, is it new?” and so on… She says these things to everyone. Who needs Anthony Robbins when you have Eva George.

We learn from experience and wisdom.
When I first started selling cars, I didn’t know anything about the business and of course had an excellent first two months in my new career. I did everything I was told by my management team. If a customer asked me what time it was, I would politely excuse myself and go and find out. If a customer asked me what the payments were going to be, I had no idea. If they asked me what the best price was, I really did not know. If I was asked what was my car worth, I really, really had no idea. This might all sound like old school BS, but I was new and did what I was told by my elders. The problem, I found after my first two months was I felt I needed to know more about everything, so that I could speed up the selling process for the customer. If they wanted to know what their car was worth I would give them an approximate value. I would give my customers everything they want, quickly and with no BS. Of course this would get me more deals, right…… WRONG.

Let’s get started with today’s sales meeting.

Who does all of your vehicle appraisals at the dealership?

That is correct, your sales management team does all appraisals of used vehicles. You do not. Why? Because it’s one part of their job description, not yours. That’s why they get paid the big bucks. Here is an example of why you can not tell the customer what you think their vehicle is worth. In this example the actual trade value of the customer’s vehicle is $5000.

Deliberate High Ball
Sales person tells the customer their vehicle is worth around $8000

In this scenario, of course, the customer will still listen to you and follow you all around the dealership. Because you’re the first sales person that has told them what they have been waiting to hear. They love you – for now. When it comes time to negotiate the deal, the deliberate high ball scenario will have a lot of explaining to do too salvage the deal.

Accidental Low Ball
The sales person tells the customer their vehicle is worth around $3000.

In this scenario the potential customer thinks you are rip off artist. They will not want to talk with you and when they leave will and do tell all of their friends what a joke you and your dealership are. When you do the accidental low balled you will not even get to a negotiation. In most cases, the customer will leave the dealership quickly, no deal.

Now that we understand why it is important not to tell the customer what we think their vehicle is worth. Let’s figure out how to handle the following scenarios.

Customers will always feel their trade is worth more than the current market value. Everyone wants retail for their vehicles when trading in, I know I do.

The following are word tracks you can use or modify them to your own style.

Scenario One
Customer says:
” Mr. Salesperson can you tell me what my car is worth”

Tell the customer:
“Yes I certainly can.”

Ask them what kind a vehicle it is and can they provide you with all the maintenance information etc. If it’s a late model (1997) or older vehicle or has high mileage

Tell the customer:
“It sounds like a good vehicle and I bet it’s in good shape, although I don’t know exactly how much it’s worth, right now. Would it be ok if you tell me what you are looking for in a new vehicle first and then I’ll get our vehicle appraiser to do a professional appraisal on your vehicle?

If this works, continue with your selling steps.

Scenario Two
Customer Says:
“What will you give me for my car?”

Your response:
“Mr. Customer, we have a vehicle appraiser who will be more than glad to appraise your vehicle, but first let’s find a vehicle you’re interested and then I’ll get your vehicle appraised, ASAP OK?”

Continue with your selling steps.

Scenario Three
If the customer is persistent and says A or B:
Customer Says:
A – “I want my car appraisal first before I look at any vehicles on your lot!”
B – “I need to know what you are going to give me for my car before I can make a decision on what car I can afford.”

Do not argue with them.

Your response:

“OK, no problem! Can I have your car key? I’ll also need your ownership, exact mileage, maintenance records and has the vehicle ever been in an accident?”

Also ask them;
“Mr. Customer can you tell me where your car is parked please?”
Your next step is to go to your manager’s office with all of this information and explain what you are doing with the customer. The objective here is to get back to your customer ASAP and continue with the vehicle selection, demo drive etc…. When you get back to your customer tell them:

“Ok Mr. Customer we are getting your vehicle appraised. It is going to take few minutes. So while we wait, what features are you looking for in your NEW vehicle?”

This will give you the opportunity to find a vehicle for the customer and then continue with your selling steps. In most cases, the manager will not do the appraisal immediately but this is not why you brought the appraisal to the manager. You brought the appraisal to your manager because that’s what the customer wanted. We do not want to fight or argue with this type of customer; we want to help them. Work with them not against. When you have found a vehicle, work out the difference number and close the sale.

Now the big question is;
When do we tell the customer what their vehicle is worth?

The answer is when they have picked a vehicle from our stock and want our vehicle rather than their present one. This may sound like old school but it works. I’ve said it before in my sales meetings … Timing and Patience.
What I’ve shown you today is what most of you get told everyday from your sales managers, which is pick a vehicle and then I’ll do your customers trade appraisal. The reason why is because it comes from many years of experience, age and wisdom. Just like the best sales people and businesses have a strategic game plan – well thought out, well oiled, well practiced and rehearsed. Every angle has been covered, even a retreat and reorganize contingency has been put into place.

We learn from experience, it really works.

Darin’s Wrap-up
Today’s sales meeting is hard to put on paper and some other systems do work but at the very least I hope you have received a couple of ideas to work with. I know it will give you something to think about the next time someone ask you “What’s my car worth?”
___________________________________________________________________________________________________________

Written by Darin B. George, Founder
Automotive Sales College
888-681-7355

Vehicle Transportation Risks

How To Mitigate Your Vulnerability To Vehicle Transportation Risks

I was recently at a trade show where a major car carrier’s advertising stated, “We have a 99.8 percent damage-free rate, which gives you 100 percent confidence.” This translates into one damaged vehicle out of every 500 moves, a statistic that may or may not inspire 100 percent confidence. The statement does, however, expose the reality that damage occasionally happens no matter how competent and careful your carrier may be.

Moving vehicles hundreds or thousands of miles on the open road is a tough job and incidents occur whether you choose to work with a small owner operator or a company with a fleet of 1,000 trucks.

Vehicle transportation has become part of doing business for every dealer. As the sluggish economy has reduced the demand for new cars, demand for pre-owned vehicles has continues to rise. According to Jim McKnight, president of Online Solutions for Manheim, "Dealers can manage these challenges [to their new car sales] by making an effort to stock their lots with affordable used vehicles…used car inventory should be a dealer’s top priority in 2008." Unfortunately, keeping more used vehicles on the lot means more transportation for most dealers.

In this climate, transportation efficiency is more important than ever. While price is always important, proper insurance, reliability, and quick delivery can be more important issues for dealers, especially with the increased need for pre-owned inventory. You need to have the vehicles on your lot when consumers want them. Although there will always be some risk associated with transporting vehicles, some basic education will allow you to take specific steps to decrease these risks.

Use the Internet.

Make the Internet your friend for vehicle transport. There is simply no need to rely on the slow, inefficient fax and phone method to find carriers to move your vehicles. Additionally, you are no longer restricted to using the two or three carriers you know, hoping that they can move your cars when you need them, at the price you want. Using online services provides you with access to literally thousands of carriers. In most cases, you can quickly find a carrier to suit your needs, often in minutes.

In addition, you can now check carrier ratings online. User generated content allows you to learn what other dealers have experienced with particular carriers. Jerry Scott, sales manager for Power Auto Group, recommends that you "always check carrier’s online ratings and always make sure you know how much insurance they carry." With these ratings, you’ll know if dealers have had negative outcomes or great results.

Ensure proper insurance and documentation.

Always get carrier’s Motor Carrier Authority or MC number. Then check with the Federal Motor Carrier Safety Administration (FMCSA) to confirm that their MC Number is still active with the Department of Transportation. This information is available at http://www.fmcsa.dot.gov. In addition, always call a carrier’s insurance company prior to arranging transport, because a policy can be cancelled at any time. To speed up the insurance verification process, ask for the insurance agent’s contact information, rather than the insurance company’s generic contact information. This way you have a much better chance of talking with a live person instead of an automated phone system.

Next, confirm that the amount of insurance coverage is sufficient. Ask the carrier how many total vehicles will be transported along with your own. The average value of a used vehicle transported in the U.S. is between $25,000 and $35,000, with some vehicles worth much more, so a carrier with an eight-car hauler should have a policy of at least $250,000.

Confirm that the carrier can ship both new and used vehicles. Just because a carrier has cargo insurance does not mean it is covered to ship used vehicles. Also, find out if there is a ‘radius limit’ associated with the insurance policy. A carrier can save money by indicating to their insurance company that they only drive in a limited area. If this is the case, you need to confirm your vehicles will not be going outside of this limit.

If you use certain carriers on a regular basis, ask to be added as a certificate holder on the insurance policy. This way, if their coverage changes you will be sent a new insurance certificate or notification if the policy is cancelled. This does not guarantee a carrier has coverage, but makes it easier for you learn about changes in coverage.

Documentation and communication are the keys to successful resolution of any conflicts that may arise. A carrier that insists on taking photos or detailing damage on paper before loading a vehicle is simply following best practices, and should not be rushed to get the car on the truck. In the event of a problem or legal issue, use the FMCSA as a resource for working through issues with carriers via their Website http://www.fmcsa.dot.gov or phone 202-366-2519.

Vehicle transportation is becoming more important for dealers and there will always be risks, but you can be smart about it and decrease your vulnerability. First, use online services to get faster service, to have access to more carriers, and to check carriers’ user ratings. Next, always conduct thorough due diligence to ensure proper insurance coverage. Finally, make sure you keep proper documentation and use the FMCSA as a resource.
_____________________________________________________________________________________________________

Joe Steinberger is the vice president of product and business development for CentralDispatch.com. For more information email him at joe@CentralDispatch.com or visit http://www.CentralDispatch.com.

Vehicles with Carfax Reports Sell 5-9 Days Faster

Retailers wanting to turn their inventory more quickly ought to consider utilizing Carfax Vehicle History Reports, according to a study recently released from JMsolutions, a division of JM Family Enterprises.

The study shows that vehicles sell up to nine days faster with Carfax Vehicle History Reports. Dealers who run Carfax Reports within JMsolutions’ AAX™ used vehicle inventory management solution prior to retail lower vehicle turn by five days on average. Vehicles that are identified as Carfax 1-Owner cars turn nine days faster.

“With the inclusion of Carfax in the AAX system, there is a significant impact being made for our dealers,” said Tim Zierden, assistant vice president and general manager, software solutions, JMsolutions. “Dealers need to take every advantage available to them today. Our study confirms that consistent use of Carfax Reports means increased revenue to dealers.

Having instant access to Carfax Reports while appraising a car means there is less likelihood that a dealer will miss something in the vehicle history that might impact the value of the appraisal. Once they have pulled the report in the AAX system it is available to them for as long as they own the car.”

In addition, the study, based on more than 52,000 vehicles retailed by dealers using AAX, shows a lift in resale value when dealers run a Carfax Report within AAX before retailing a vehicle. The combined inventory cost reduction and resale lift nets dealers a minimum $250 increase per car.

“As this study shows, dealers that include a Carfax Vehicle History Report with their retail units increase vehicle sales rates and profitability,” said Larry Gamache, communications director at Carfax. “Our dealer customers make better decisions about the cars they put on their lot by running a Carfax Report through inventory systems like AAX. Just as important, dealers have Carfax Reports automatically linked to their vehicle listings almost anywhere online, giving consumers greater confidence to buy.”

Gamache said dealers pay a modest fee for the report, usually about $12, and receive online advertising support as well. The Carfax service is auto-linked to all the major online classified services. The Carfax link can be used on third-party sites as well as the dealer’s own Web site.

Gamache said it’s not surprising that the one-owner vehicles sell more than 50 percent faster with a Carfax report.

“Consumers are convinced one-owner vehicles typically are better cared for and have fewer problems,” Gamache said. “Also dealers should consider updating vehicle service information to Carfax from their service centers. If they subscribe they can get free advertising for their service center as a subscriber benefit. When a consumer checks the vehicle history report he or she can see where the service on the vehicle was performed.”

Results from previous studies by GE Fleet Services and Liquid Motors showed similar results about the impact of Carfax Reports on vehicle resale value and inventory turn. More than 32,000 dealers provide free Carfax Vehicle History Reports for vehicles on their lot or listed online at places like Cars.com and Yahoo! Autos to build consumer confidence.

Millions of used car buyers and sellers each year rely on Carfax. Using the unique 17-character vehicle identification number (VIN) found on vehicle dashboards and title documents, Carfax instantly generates a detailed Vehicle History Report on any used car or light truck. For more information visit http://www.carfax.com.
__________________________________________________________________________________________________________

This article has not been attributed to any one author. It could be a press release or some other form of disseminated information.