There is an old saying that those who do not learn from history are doomed to repeat it. In the automotive industry, it can seem like no matter what the current market looks like the same kinds of events seem to happen over and over. This factor makes it important to understand which best practices are consistently successful, and which ones are not.
A great example of this type of practice is test driving trades with your customers. For a little background, let’s look at gross in pre-owned vehicles. When you break it down, there are only three ways to create gross:
Showroom Control (AKA your discounting practices)
For this article we are going to focus on the first bullet point: acquisition. Unfortunately for dealers, we have limited pricing control on buying our own off-lease vehicles as it relates to creating significant gross. When buying auction vehicles, if you are not able to locate units with significant gross potential, you have two choices – buy the vehicle because it turns quick and pick up recon and back end money or pass and do not buy it. A third choice is to increase or maintain your Look to Book through trades by not alienating your customer doing a in-depth value evaluation. Because trades are your best option to create gross, it’s time to ask yourself “how can I get more highly valued trades?”
It seems these days, that many managers have forgotten about the timeless process of getting your customer to go on a quick trade test drive with the manager. The goal of this test drive isn’t to sell them a vehicle, but to get the customer to sell you their vehicle. While test driving (a 5-minute interaction), make sure you are building rapport for the future and asking the right questions to properly value the trade, placing most reconditioning costs back on the original owner in the form of deductions.
- Go through all the gears and take note of any issues
- Acceleration—fairly-hard and stop somewhat quickly to check for any problems
- Throughout the drive, be on the lookout for obvious noises and pulling
- Hopefully, you can find a small pothole or bump to check for suspension noises
- Properly time a few questions about the vehicle that will help get you additional information with the goal of properly valuing the trade and reconditioning costs
Questions to ask:
- “Have you replaced your tires or brakes in the last year?”
- “Where do you get your services done, oil changed?”
- “Do you have any receipts in your glovebox of recent maintenance work?”
- “Have we or other shops recommended work that still needs to be completed?”
- You might also have more questions you like to ask, if so please share.
The goal is to get most of the reconditioning costs the deducted from the vehicle’s value while not alienating the customer. The dealerships who do the best job are the ones who get back from the test drive and measure the tires and brakes in front of the customer. This includes measuring the outside pad with various simple tools and taking off a bit more for the unseen inside pad. This is the easiest way to create gross, and if done properly, will not diminish your look to book. If you need any assistance with this best practice, I am more than happy to work with you and your team with implementation and training.
Want to Earn More Gross in Variable Operations?
There isn’t a dealer, GM, or salesperson who doesn’t want to close more deals and improve their gross profit margins. Making this happen however, isn’t as easy as it seems. If it feels like the money brought in by your front end can be very inconsistent, NCM is ready to help you succeed.
For some additional ideas on improving your variable operations, check out these articles from our automotive experts!