Pricing your used car - retail price vs internet price and amount of discount

[joe.pistell]

The used car market is so vast, so everywhere, that thinking that Velocity is the only way to sell cars is just flat out wrong.

Velocity dealers, you need to HUG the Muller Toyotas and the UsedcarKing.com's of the world. For the velocity model to sail along and turn out easy profits, you depend on "eye popping A/B price comparisons".

Velocity is only one way to sell. Muller Toyota's model is another. CityAuto.com is another TOTALLY different used car model. AuctionDirectUSA.com is another. UsedCarKing.com is another. What of those eBay and Craigslist specialists? They don't need no stinking vAuto (or similar). Then there are the one price stores.

In a perfect world, what a Velocity dealers WANT is only a few active velocity dealers in their market PERIOD. The easy velocity money goes to the 1st adopters. Once the market "tightens up" with several velocity dealers chasing the "view by price, Low to High", then the easy advantage is lost and the dealer is forced to find another product that is less "crowded". Once this new "less crowded" inventory arrives, the sales team needs to be "all in" and know the new product cold. All the while the Smart Velocity dealer is attacking costs and inefficiencies to allow him to sell with even lower gross.

Velocity sales model really tests the managers skills, when its's done right, money is to be made, but it's a lot of work (100% more turns, 10% less gross, same overhead = more profits)

 

[ed.brooks]

The used car market is so vast, so everywhere, that thinking that Velocity is the only way to sell cars is just flat out wrong.

Velocity dealers you need to HUG the Muller Toyotas and the UsedcarKing.com's of the world. For the velocity model to sail along and turn out easy profits, you depend on "eye popping A/B price comparisons".

Velocity is only one way to sell. Muller Toyota's model is another. CityAuto.com is another TOTALLY different used car model. AuctionDirectUSA.com is another. UsedCarKing.com is another. What of those eBay and Craigslist specialists? They don't need no stinking vAuto (or similar). Then there are the one price stores.

In a perfect world, what a Velocity dealers WANT is only a few active velocity dealers in their market PERIOD. The easy velocity money goes to the 1st adopters. Once the market "tightens up" with several velocity dealers chasing the "view by price, Low to High", then the easy advantage is lost and the dealer is forced to find another product that is less "crowded". Once this new "less crowded" inventory arrives, the sales team needs to be "all in" and know the new product cold. All the while the Smart Velocity dealer is attacking costs and inefficiencies to allow him to sell with even lower gross.

Velocity sales model really tests the managers skills, when its's done right, money is to be made, but it's a lot of work (100% more turns, 10% less gross, same overhead = more profits)

Joe, As always, great insights. I would say however, that most Velocity dealers thrive not by having the lowest price, but simply by making sure they are competitively priced, avoiding high Market Days Supply vehicles where possible AND doing a great job merchandising their vehicles. Being the cheapest isn't the answer.

The right car at the right price (not the cheapest price), advertised well, and backed by a dealership with a good reputation, is a very tough combination to beat.

As for the "crowded market", a good Velocity dealer will be constantly watching Market Days Supply and shifting to less 'crowded' vehicles, staying ahead of trends instead of following them.

 

[Jeremy Brown]

Guys Ive said it before and I will say it again the Provision tool is the best I ve used. It helps you get the right car at the right price so you can make A fair profit. I will not let my owner get rid of it, fact is he wouldnt anyway. It makes me look like a genius! You guys can go ahead and club your baby seals once or twice a month. I will make my fair profit 50-100 times and enjoy the customer retention market share I gain.

 

[jay.lynch]

! You guys can go ahead and club your baby seals once or twice a month. I will make my fair profit 50-100 times and enjoy the customer retention market share I gain.

Hi Jeremy,

I am not sure I see any support in the forums for "clubbing of any kind;" however, when did gross become a bad word? If one were to execute a proper acquisition strategy, price those vehicles where he/she can sell them, and turn them quickly would gross be a bad thing?

If dealerships are having any problems currently it is sourcing. I am sure we can all agree that trades are the best first option. Generally I have focused on 4 areas with dealers:

1. I want to see trade win rates over 50%. Now I want to see you working those missed trades.
2. Targeted query of your existing customer base for specific vehicles that you need -- makes for a great call list for the sales people.
3. If you are a group I recommend that you execute a group trading strategy which incorporates weekly meetings -- at the executive level to monitor "trap trading." Having said that, I have seen groups with a variety of franchises in a market area go from a 60% retail sell through to placing as much as 96% of vehicles of which sell through is as high as 94 to 95% -- all the result of an executed group trading strategy.
4. The last place to source is the online and brick and mortar auctions. The run lists that are available for brick and mortar and picked up by the inventory management tools are not very accurate and often there are numbers of additions the day of.

Finally, and to your point on sourcing, ALG is suggesting that used car availability will continue to underperform demand through 2015. It is going to get more difficult to get used units in the immediate future. The following link is the last ALG report I have although I am reporting data I recently saw in a power point.

http://www.automotivedigest.com/cms...eport_-_July_August_2011_6_6_2011-4_30_PM.pdf

 

[jay.lynch]

Guys Ive said it before and I will say it again the Provision tool is the best I ve used. It helps you get the right car at the right price so you can make A fair profit. I will not let my owner get rid of it, fact is he wouldnt anyway. It makes me look like a genius! You guys can go ahead and club your baby seals once or twice a month. I will make my fair profit 50-100 times and enjoy the customer retention market share I gain.

Hi Jeremy,

I am not sure I see any support in the forums for "clubbing of any kind;" however, when did gross become a bad word? If one were to execute a proper acquisition strategy, price those vehicles where he/she can sell them, and turn them quickly would gross be a bad thing?

If dealerships are having any problems currently it is sourcing. I am sure we can all agree that trades are the best first option. Generally I have focused on 4 areas with dealers:

1. I want to see trade win rates over 50%. Now I want to see you working those missed trades.
2. Targeted query of your existing customer base for specific vehicles that you need -- makes for a great call list for the sales people.
3. If you are a group I recommend that you execute a group trading strategy which incorporates weekly meetings -- at the executive level to monitor "trap trading." Having said that, I have seen groups with a variety of franchises in a market area go from a 60% retail sell through to placing as much as 96% of vehicles of which sell through is as high as 94 to 95% -- all the result of an executed group trading strategy.
4. The last place to source is the online and brick and mortar auctions. The run lists that are available for brick and mortar and picked up by the inventory management tools are not very accurate and often there are numbers of additions the day of.

Finally, and to your point on sourcing, ALG is suggesting that used car availability will continue to underperform demand through 2015. It is going to get more difficult to get units. Below is the last report I have from ALG but I expect to see an update shortly.

http://www.automotivedigest.com/cms...eport_-_July_August_2011_6_6_2011-4_30_PM.pdf

 

[danoneil]

One customer is looking for a 2008 CRV EX 4WD. One dealer shows a $1500 discount and the other shows a $500 discount for a comparable CRV.

Does a customer put your dealership on their short list because your dealership has a $1500 discount ? My answer is no.

Do they visit your dealership 1st because your ad shows more urgency with the bigger discount ? My answer Maybe

 

[john.quinn]

Does a customer put your dealership on their short list because your dealership has a $1500 discount ? My answer is no.

Do they visit your dealership 1st because your ad shows more urgency with the bigger discount ? My answer Maybe

Are You Serious??? Dan, you're married, right??

Every married man in the world will commiserate with the following conversation:

{After walking through the door with 12 stuffed bags on each arm and receipts totaling hundreds and hundreds of dollars:}

Honey, I saved soooooo much money today!!! Everything was 25% off! Didn't I do great?!?!?!

Who makes the majority of purchase decisions again???

 

[billnj]

From what I have seen, a lot of people seem to have differing views of the Velocity concept.

To me it's really simple. Price cars competitively, get them ready for sale FAST, buy units that sell, describe them well, and...

You'll do more business.

I can get up tomorrow, go over to Enterprise car sales in Bogota and buy 20 2011 Impala LSs, and if buy all the brown and gold ones I bet I can get em a little cheaper too. I can put them online with 8 or 9 photos, use a canned description, mark 'em up $4,000 each and sit back and wait.

And wait

And wait

And wait....

And I had better bring my iPad charger with me to work because everyone is going to be waiting in line to play crazy birds on it.

Instead we spend a lot of time watching our online pricing, we are really starting to rethink our stocking, we're deciding what to keep and what to get rid of at the time of appraisal instead of saying "Gee that's a clean 40 mile 4 year old car let's put it on the lot". I make sure that we're priced in the lower half to third of comparable cars, and if it's a car that has a huge market days supply I get really aggressive. Remember what I said about them stripped out Altimas?

I have to be a whore to sell 'em because if I am greedy, I don't sell 'em. Simple as that. So I make $800 in the front and $1200 in the back and I move them. Or I can sit and sell one here and there for $2500-3000 front end and sit on a lawn chair in the Nissan used car lot and watch moss grow on the others. And that also means that the lady who lives the next town over is likely to buy that car from US and not from a dealer out in Queens, so we'll see her for service, and she'll tell her friends, and birds will sing and flowers will dance and Mickey Mouse will smile.

Our Dodge store took in a nice used BMW yesterday. It's already online with images and I'll have the comments done shortly. Before? It might be online with images by next week sometime and we'd have marked it up $5k over ACV. Now we're seeing us selling cars like that, and making good money on 'em, within 5-10 days of arrival on the lot.

It's nothing really that earth shattering when you think about it like this...

You take in a nice car that you'd usually do well with for, I dunno, $15,000 which is, say, about right. Maybe Galves is $14750 but MMR is $15700 and it's a car you know that you normally do well with.

You throw it on the lot and the internet for $19995. 45 days later you wonder why it hasn't sold. Now Galves is $14k on it and you've spent $500 on it getting it ready and MMR is down to $15k so you know, all in, you'll blow close to a grand wholesaling it.

UhOh.

Now is when we all start to get worried and when panic starts to set in. "OHMYGOD WE GOTTA MOVE THAT UNIT!"

So we mark it down to $17997 and spiff it $100 and it sells.

Why not just do that out of the gate? We make the same gross, but we don't have that $15000 clogging up the floorplan or that cash rotting in the sun on the lot. Plus if you do that you don't have an aged unit on the lot, and we know how much our salespeople just love showing aged units don't we?

And that's my take on Velocity.

And if there's a used car manager or desk guy out there who can't relate to the $20k car selling for $18k I'd be shocked. You're all reading this and thinking either "Shut this idiot up" or "Yeah been there, done that".

For all I know I'm doing it all wrong and I'll get canned... but it's working for us so far

 

[ddavis]

The used car market is so vast, so everywhere, that thinking that Velocity is the only way to sell cars is just flat out wrong.

Velocity dealers, you need to HUG the Muller Toyotas and the UsedcarKing.com's of the world. For the velocity model to sail along and turn out easy profits, you depend on "eye popping A/B price comparisons".

Velocity is only one way to sell. Muller Toyota's model is another. CityAuto.com is another TOTALLY different used car model. AuctionDirectUSA.com is another. UsedCarKing.com is another. What of those eBay and Craigslist specialists? They don't need no stinking vAuto (or similar). Then there are the one price stores.

In a perfect world, what a Velocity dealers WANT is only a few active velocity dealers in their market PERIOD. The easy velocity money goes to the 1st adopters. Once the market "tightens up" with several velocity dealers chasing the "view by price, Low to High", then the easy advantage is lost and the dealer is forced to find another product that is less "crowded". Once this new "less crowded" inventory arrives, the sales team needs to be "all in" and know the new product cold. All the while the Smart Velocity dealer is attacking costs and inefficiencies to allow him to sell with even lower gross.

Velocity sales model really tests the managers skills, when it's done right, money is to be made, but it's a lot of work (100% more turns, 10% less gross, same overhead = more profits)

Joe, pretty much true of about everything we do ...lots of work and some skill?

Today, I didn't leave my office, which is at the back of the store. When I finally surfaced, they wondered what I have been doing all day.

 

[Jeff Kershner]

From what I have seen, a lot of people seem to have differing views of the Velocity concept.

To me it's really simple. Price cars competitively, get them ready for sale FAST, buy units that sell, describe them well, and...

You'll do more business.

I can get up tomorrow, go over to Enterprise car sales in Bogota and buy 20 2011 Impala LSs, and if buy all the brown and gold ones I bet I can get em a little cheaper too. I can put them online with 8 or 9 photos, use a canned description, mark 'em up $4,000 each and sit back and wait.

And wait

And wait

And wait....

And I had better bring my iPad charger with me to work because everyone is going to be waiting in line to play crazy birds on it.

Instead we spend a lot of time watching our online pricing, we are really starting to rethink our stocking, we're deciding what to keep and what to get rid of at the time of appraisal instead of saying "Gee that's a clean 40 mile 4 year old car let's put it on the lot". I make sure that we're priced in the lower half to third of comparable cars, and if it's a car that has a huge market days supply I get really aggressive. Remember what I said about them stripped out Altimas?

I have to be a whore to sell 'em because if I am greedy, I don't sell 'em. Simple as that. So I make $800 in the front and $1200 in the back and I move them. Or I can sit and sell one here and there for $2500-3000 front end and sit on a lawn chair in the Nissan used car lot and watch moss grow on the others. And that also means that the lady who lives the next town over is likely to buy that car from US and not from a dealer out in Queens, so we'll see her for service, and she'll tell her friends, and birds will sing and flowers will dance and Mickey Mouse will smile.

Our Dodge store took in a nice used BMW yesterday. It's already online with images and I'll have the comments done shortly. Before? It might be online with images by next week sometime and we'd have marked it up $5k over ACV. Now we're seeing us selling cars like that, and making good money on 'em, within 5-10 days of arrival on the lot.

It's nothing really that earth shattering when you think about it like this...

You take in a nice car that you'd usually do well with for, I dunno, $15,000 which is, say, about right. Maybe Galves is $14750 but MMR is $15700 and it's a car you know that you normally do well with.

You throw it on the lot and the internet for $19995. 45 days later you wonder why it hasn't sold. Now Galves is $14k on it and you've spent $500 on it getting it ready and MMR is down to $15k so you know, all in, you'll blow close to a grand wholesaling it.

UhOh.

Now is when we all start to get worried and when panic starts to set in. "OHMYGOD WE GOTTA MOVE THAT UNIT!"

So we mark it down to $17997 and spiff it $100 and it sells.

Why not just do that out of the gate? We make the same gross, but we don't have that $15000 clogging up the floorplan or that cash rotting in the sun on the lot. Plus if you do that you don't have an aged unit on the lot, and we know how much our salespeople just love showing aged units don't we?

And that's my take on Velocity.

And if there's a used car manager or desk guy out there who can't relate to the $20k car selling for $18k I'd be shocked. You're all reading this and thinking either "Shut this idiot up" or "Yeah been there, done that".

For all I know I'm doing it all wrong and I'll get canned... but it's working for us so far

It's not rocket science is it!?

Thanks for commenting Bill.

Use some great analytical data combined with some commonsense and watch what happens.