One of the common misconceptions I hear about the used vehicle department at many dealerships is how they are only in the business of retailing used cars and trucks. While this may have been true many years ago, modern UV departments are really in the "page view" business. Across the country, we are seeing a direct correlation between the number of page views (Vehicle Detail Pages, or VDPs) and the number of retail deliveries each month. If online page views to your UV inventory are lacking, there are a few simple practices that can effectively drive traffic.
Most velocity-oriented UV departments generate an average of 80-105 page views for each retail used vehicle delivery. This translates to an average of 2-2 ½ page views per vehicle, per day. Using this as a guide, you can see how your traffic volume compares to others in your industry. To boost your views, it is important to understand the components that impact the number of page views (VDPs) you are receiving. The main components to analyze are your photos, the vehicle description, and the price.
Photos: Nothing but the truth
Ask your UV manager to select which image should be the first photo for each vehicle. This is the photo that will introduce the vehicle to your audience. The image should be of high quality, the car should be appropriately lit, and the photo should highlight the best angle of the car. First impressions count, especially when sifting through the used inventory section of a website. Next, make sure you have at least 25 photos of each vehicle. Customers want to see every aspect of the car, and if there are any areas of the car missing, the customer will assume there is something wrong or that you're trying to hide something. Leave no room for misinterpretation.
Description: Tell a story
It is crucial that you avoid utilizing the computer-generated description that only contains stats and the standard and optional equipment. Instead, consider telling a story about each used vehicle. A Jeep Wrangler isn't a small SUV; it's a lifestyle that allows you to embrace the rugged outdoorsman inside you. A truck is not just a list of horsepower and torque, but a multi-functional tool designed to improve the way you work and live. Even Dale Pollak, founder of vAuto, has stated that the vehicle description is as important as the photos when selling your used car inventory. Keep in mind that only the first 150 (or so) text characters comprise the first few lines of the description on AutoTrader and Cars.com. So be sure to create complete description teasers for these formats as well. Your teaser and your full description can, and should, be different.
Price: First and second bucket
One of my clients uses the "98-84" approach for their used vehicle pricing. Through this approach, they shoot for a retail selling price of 98% of the market price and a cost-to-market (including reconditioning expense) of 84%. This provides them with a 14-point spread on most used vehicles.
When you take the retail gross profit per vehicle (and other metrics like reconditioning expense) by bucket and compare it to the respective used vehicle inventory by bucket, it reinforces the commitment to the velocity approach utilized by vAuto and other competitors. It also emphasizes the importance of aging one's inventory. A great measuring stick for this would be to retail 2/3rds of your used vehicles in the first and second buckets. Departments that do not accomplish this usually have mediocre gross profit PVR (i.e., too many used vehicles retailed in the third and fourth buckets) and a variety of wholesale issues.
Consider a measurable objective of 2/3rds of all used vehicle inventory, 1-30 days in stock and 1/3rd of all UV inventory 31+ days in stock. This should coincide with 2/3rds of all retail deliveries (in each month) being 1-30 days old. This ratio will allow your UV manager to price at 102%-105% of market in the first bucket for a week or so, provided that the vehicle is an A-car (one where we can replace the customer more easily than we can replace the unique car, if we have a used vehicle with a low market day supply, or if we have a used vehicle with a high scarcity index). Following these steps should increase gross profit PVR in the first bucket.
Furthermore, I recommend that you stick to the following intervals to improve your gross profit in the other pricing buckets as well:
- Review non-core cars at 20 days in inventory. Ask yourself, "why should we keep this car for another week if we only have __ page views (VDPs) after advertising this car online for 20 days?"
- Review all used vehicles at 30 days in inventory (what can we do to increase activity on this car?):
- Reshoot the photos
- Rewrite the description
- Lower the price
- When you have only 15 days until a vehicle is 45 days old, we know your up-front gross profit will be minimal (it may be barely sufficient to pay the salesperson's compensation), and you may lose money retailing it. In this scenario, what is your plan for this vehicle? Going forward, your 30-day mark should be when you implement your final plan to retail the vehicle prior to 45 days in inventory.
- You should adopt a hard-out policy for each used vehicle. This includes 60 days for certified vehicles and 45 days for non-certified vehicles.
- Use the details in an ROI report (exclusive to 20 Group members) to take note of each vehicle that has $3,000 reconditioning expenses and $200 up-front gross profit. These vehicles may be an indicator of misappraising a trade-in or a lease-return. The used vehicle manager should be accountable here.
- Consider assigning someone to complete this ROI report for your dealership so that you can review this report with the UV manager (using their own numbers), and emphasize the benefits.
- A practice encouraged by Mercedes-Benz USA (and other OEMs) is to have at least one certified car or SUV on the new car showroom as a "switch vehicle."
- Finally, ask yourself, do you have a sufficient number of salespeople to achieve your monthly goal for retail used vehicle deliveries? If not, hire them.
If you are interested in learning more best practices from Terry or his fellow moderators, consultants, and instructors at NCM, we encourage you to join one of our many 20 Groups or take advantage of our training courses through the NCM Institute. Let's begin your dealership improvement today!