Successful dealers already know about the importance of reconditioning, but not everyone understands how to maximize the value from this process.
The reconditioning process can add hundreds, or even thousands of dollars to a used car’s value when done right. It can also hold the key to establishing a sales training program and help drive your online reputation. Here are five of the best practices for reconditioning.
The reconditioning process usually should only take four to five days, but in reality, it can take much more for an Independent dealer, due to many factors beyond their control. And as a result, creates the need for constant effort and follow up on behalf of the dealer. There is a concept known to many as “Holding Costs”, “Opportunity Costs” or “Time to Front Line”. Regardless what you may refer to this as, it is very real and must be managed with a vengeance. The basic concept is that every vehicle that you own has a hard cost of getting it ready to sale, but it also has indirect costs while getting it ready, as well as offering it for sale. These costs keep accruing on each vehicle until it is ultimately sold and these costs vary by dealership. They generally run from thirty-five to fifty-five dollars per day per vehicle.
You can streamline the reconditioning process and save time by letting service managers make repairs with costs below a certain threshold immediately, but I do not feel that this should be done. Each vehicle should stand on it’s own and every vehicle should be reviewed and discussed with either the buyer or the person responsible for getting it sold. That way the people that are in charge of selling it will know more about each vehicle and the buyers can learn from the results of the reconditioning inspection.
As with any business investment, you should spend money on reconditioning wisely. Make sure your staff members follow dealership procedures to maximize their use of time and money. The most common reason a vehicle does not sell in the first thirty days it is on the front line is skimping on reconditioning. Meaning, not taking care of a recon need to “save” money on recon amounts.
Whether a repair is a good idea depends on the age of the vehicle, the mileage, the condition of the rest of the car, and many other factors including your business model.
There is no one number that is the “right” amount to spend, as each unit must stand on it’s own. In fact, some business models include purchases that other dealers don’t want because of certain types of repairs or repairs that may be expensive. While others attempt to purchase only those vehicles that don’t need much, if anything done other than a good detail job.
You should expect to spend more on trucks and luxury vehicles on average though.
Tracking your reconditioning should come in two varieties: Cost, and time.
Tracking the amount you spend versus the prices you get for vehicles carefully can help your company make better decisions about repairs in the future. It can also help you find and eliminate any inefficiencies or excess costs in the reconditioning process. And last, it can help your buyers learn more about various vehicles tendencies for needing repairs.
For example, your staff members can save money on some repairs by ordering and using quality, non-OEM parts. In many cases used parts can be used and are generally readily available. There are several online websites to locate and procure non-OEM, remanufactured and used parts and components.
Many dealers only think of the recon process as the things we do to the inventory to get it ready for sale. That is not where the “recon buck” stops.
The Inspection, the Recon Process and any Quality Guarantees offered should be intertwined into the Sales Process. These can also become the basis for sales training. But it still doesn’t stop there either. It will, over time, shape the company culture as relates to customer handling and reputation management.
If you don’t use a written Inspection Form and have a formal approval process for doing the needed items to get a vehicle ready for sale, get one or create one.
Proper detailing along with mechanical reconditioning can help you get the most for your money and make the vehicles you sell more appealing to potential buyers. While many dealers really focus more on mechanical repairs and preventative maintenance, a world class detail can make all the difference. While on the lot, customers can not see the mechanical repairs done to get it ready but they sure can see a world class detail job.
The truth is, there is always a group of wholesalers at any large auction in the country whose vehicles always look better than the rest of the crowd. And any dealer or buyer that frequents these auctions know that as a result of the appearance of these dealers’ vehicles, they sell at a much higher percentage and at a higher price than that all the rest.
So, if an experienced buyer is willing to pay more for a vehicle because it looks better than the rest, how much more is one worth to a person that buys a vehicle every three to five years. It could be thousands.
Both processes can raise vehicle values, and using them together can help you increase profits more than either could alone. But you must train your people to “Sell” the recon story.
If you need assistance in turning this information into reality at your store, please call NIADA Dealer Development.
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