When I am in 20 Group meetings or instructing Used Vehicle Management courses at the NCM Institute, I see a common trend among used vehicle managers: They tend to focus too heavily on creating front- and back-end gross. There is nothing wrong with wanting to increase the amount of operating gross in one’s dealership, but there should be a higher priority than just producing the highest gross.
When I see UV managers focusing too heavily on gross, I am quick to show them a simple line of data that they might not normally concentrate on—how much expense did they incur to sell one vehicle? For example, if I see an average operating gross per unit of $2,500, I ask the manager if they think this is good performance. Many times, they respond with a big, resounding “YES!” However, if the average expense per unit to sell the vehicle was $2,700, what did the UV management team accomplish? An average loss per vehicle of $200! Multiply this amount by the number of vehicles sold for the month and … ouch! This shouldn’t be the business plan utilized by UV teams of any type.
It’s not their fault
Many dealers and general managers will be quick to blame a UV manager for this “narrow minded” behavior and their lack of focus on departmental profitability. However, most executive dealer management personnel never ask the UV management team to focus on anything besides producing gross! Most pay plan discussions in your dealership probably focus on gross, instead of on individual department success. The solution is to have discussions and meetings that center on how the UV department can operate at a profitable level. Encourage your UV management team to perform a departmental break-even analysis and/or a departmental business plan that shows a 30% net-to-gross.
This business model will force the used vehicle management team to focus differently. If they’re required to concentrate on their department’s profitability, they will likely think outside the box and perform at a higher level. They will think of ways to:
- Acquire more in-demand vehicles
- Control the cost of sale
- Perform proper reconditioning
- Turn the inventory investment faster
- Perform daily trade-walk/stock-walks
- Watch their days’ supply
- Follow a strict aging policy
- Price vehicles to market accordingly
- Track their ROI
- Control desking and sales people discounting
- Defend the sales price through proper training
Give them help
I am astonished at the lack of formal education that used vehicle management receives in dealerships today. Some managers have worked in this industry for 20+ years and have never attended a training course. Most have learned this business from working side-by-side with another manager who learned the same way. The solution? Invest a small amount of time and money to send your used vehicle management team to UV training from the NCM Institute. These training classes will teach your UV team what they need to be focusing their attention on and which industry best practices are in use today in the most profitable dealerships around the US and Canada.
The overall result will be less frustration among employees, your entire dealership team will have more fun performing their day-to-day job duties, and your used vehicle department will profit. Evaluate your used vehicle management team today. What are they focused on?
Focus your team by calling the NCM Institute today at 866-756-2620 to register for Used Vehicle Management training. To read more about the courses we offer, visit our course schedule!