Develop a pricing strategy for the cars where everyone is happy. Your GM wants to recoup his/her reconditioning and make the pack. You have a car with an ACV of $15,000 so you add the $1400 RO. Now, we add the pack and the total, so far is $19,200. The salesperson wants to make a decent commission, so we can add $2000 which would be $500 commission based on 25%. Our standard selling price is $21,200. Everyone is happy.
And if every other dealer's asking price is $17,900 and you get ZERO traffic based on this - no one is happy.
- Apr 7, 2009
- 4,837
- 2,296
- Awards
- 10
- First Name
- Joe
If the DP/GM has hundreds of used cars on the ground and re-invests that pack into massive local media carpet bombing, then, you've got a working model. If not, I'd reachout to some super smart inventory pricing guy like Ed and see just how much business this model is costing YOU.
Last edited:
Absolutely. Trust me, the dealer is happy drawing pack and reconditioning but will protest the additional $2000 saying that they will not be competitive. It doesn't matter how they price their cars. The market sets the price and the market is the internet.
Losing money on aged inventory happens all the time. If a dealership has 100 used cars in stock, how many are old inventory that is priced at a loss ?
10% - 8% ? more ?
Most used car departments cost average profit.
Do you agree ?
10% - 8% ? more ?
Most used car departments cost average profit.
Do you agree ?
- Apr 7, 2009
- 4,837
- 2,296
- Awards
- 10
- First Name
- Joe
In my circles, most stores have 2 aging management techniques.
#1. Day 99: OH SHIT! Spiff that POS!
#2. Day 11: It's a pig, 150 days supply and we're 109% of market. Mark that pig down to best price in our market before floor-plan costs throws another $grand on it.
Dan, the main reason why they lose money is because they put it above market for the first 45 days, or more. In states, like Texas, where most dealers use the Black Book, you get a new book, every week, with lower values. In 45 days, the vehicle is getting stale and the salespeople are walking around it.
Dealers that maintain a 72 hour days to market and price it to market up front, don't see a lot of wholesale losses, if any.
A friend of mine was GSM of a Honda store in Dallas. They had 65 spaces to park used vehicles. They were selling 175 used cars per month with zero wholesale losses. Most dealers have a 60 day in and out but they were at 45. I doubt that their average gross was that high but their departmental net was extremely healthy.
Your friend who is a GSM has some pretty sweet numbers.
I know that many of the old inventory we had at my dealership came from the wholesaler who purchased the car for too much.
A good example would be a paying roughly the same money for a 2010 Honda Civic LX vs. a 2012 Civic LX.
If you shop right now, I guarantee you can purchase a 2010 Civic Sedan with roughly 36k miles for $15K. You can also purchase a 2012 Civic LX for the same amount of money. Used Cars | Honda Civic Sedan - Heritage
If a wholesaler does not pay attention to new vehicle cost, they can hurt your bottom line.
If you have 100 used cars, what do you think is the normal balance between auction cars vs. trade in cars ? 50 -50 ? 40-60?
I think we'll all agree that trade in cars bring the most gross. If you are able to stock all trade in cars vs. wholesale, the profit numbers jump.
I think we'll all agree that trade in cars bring the most gross. If you are able to stock all trade in cars vs. wholesale, the profit numbers jump.
Last edited:
