I want to dedicate this article to those individuals who are trying to either become a dealer who wants a very profitable, well run, used vehicle department, and/or the managers he or she has put in charge of running a professional and profitable pre-owned department. Not everybody can succeed as a pre-owned manager. It is probably, like a parts manager, the mind set in an individual that either has the ability to see the profit in a pre-owned car when they are appraising it or looking at it going through an auction lane or buying it online. The mindset is totally different from that of looking at an order book for a new car, or menu selling as a service writer or service manager going through new corporate dos and don’ts under warranty.
The pre-owned manager is a freelance individual that is given an average of a million two hundred thousand dollars in a new car franchise somewhere in the US or Canada. He is told your primary function is to make a profit when in fact; it is a double edge sword responsibility.
“our managers are so geared to what they can get out of a car for, that they are scared to get in one to make a profit.”
Let’s not forget that becoming a dealer requires a dealer agreement. In that dealer agreement there is a section known as pre-owned department operating capital requirement. That amount of money is in there for a reason. Now, unfortunately, over time, everybody from the dealer to the manufacturer has forgotten how that came about. That number, “being dug up from a graveyard from many years past and will probably be a big WOW from the first factory guy that sees it,” was designed against the average trade rate on new cars sold on a forty five day turn, i.e. what is the average cost of a car based on 55% of the new car planning potential number on a forty five day turn.
So simple, there is nothing complicated about that, at all. It goes back almost a hundred years. It has been lost, you have fourteen thousand programs figuring and re-figuring every dealer number, when at the end of the day, it’s the same number they come up with.
If in fact, you train your manager to work within that trade rate number, that would be the mechanized portion of a guideline, however, the individual who is taking the million two is there to drive new car volume. Never forget, you are a new car franchise first. You have the capital to invest in a consumer’s trade-in to enable them to make a new car purchase or a pre-own purchase while turning that investment at a prescribed rate (45 day turn) for a profit.
That is the second mechanized guideline and the purpose that we use to identify the department, however, the mindset of the dealer and the manager has to be one that can actually walk out and see the car, reconditioned and know what they think it will bring retail.
In the last fifteen years, our managers are so geared to what they can get out of a car for, that they are scared to get in one to make a profit. The reason competition is so fierce today on the Internet is because the appraisals on these vehicles are all over the board. The one who has the mindset and the ability to cosmetically and mechanically create a product to sell far superior to anyone they compete with building a confidence level in their sales staff, knowing that the car has gas, it’s clean, keys are in it and it will start will be the winner in that market.
Author: Tim Deese
TIM DEESE is the CEO/ founder of Progressive Basics, Inc. He is a former franchised car dealer who has designed and implemented used car training and marketing for 15 manufacturers in 28 countries. He has spoken at many NADA conventions.