Used Car Business Plan

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For some, it might be the buying that is intimidating, while others are more concerned with being able to make regular sales.

But when you have the right tools in your arsenal, you’ll be better prepared to successfully take on the used car sales business.

For a $13,500 used vehicle, a cost-to-market metric of 90 percent translates to a spread of $1,500.

This is the profit margin the sales team has at its disposal to close deals.

It certainly does for some vehicles in some markets. We can’t really know with certainty whether our decisions to replace tires, install new brakes or fix small dings on windshields and upholstery make a critical difference with today’s buyers.

For these reasons, I recommend that dealers with gross profit concerns should re-evaluate, and potentially re-invent, how they handle reconditioning.

We knew, more or less, that if we invested

For these reasons, I recommend that dealers with gross profit concerns should re-evaluate, and potentially re-invent, how they handle reconditioning.

We knew, more or less, that if we invested $1 in reconditioning, it would return $1.25 for our effort and time.

Today, however, I’m not convinced this ratio holds true as a general rule.

When I see this, I’ll drill down to figure out why the cost-to-market is higher than it should be.

I often find a problem in one or more of the following three areas: In my day as a dealer, we didn’t worry too much about over-doing the reconditioning on a car.

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For these reasons, I recommend that dealers with gross profit concerns should re-evaluate, and potentially re-invent, how they handle reconditioning.We knew, more or less, that if we invested $1 in reconditioning, it would return $1.25 for our effort and time.Today, however, I’m not convinced this ratio holds true as a general rule.When I see this, I’ll drill down to figure out why the cost-to-market is higher than it should be.I often find a problem in one or more of the following three areas: In my day as a dealer, we didn’t worry too much about over-doing the reconditioning on a car.To root out the source(s) of the trouble, I will closely examine the factors that make up the cost-to-market metric for a dealer’s inventory.This number shows the relationship between the total costs for a vehicle (acquisition, fees / transportation, reconditioning, packs, etc.) and the prevailing retail prices for the same or similar vehicles in the market.I’ve found this practice can shrink a dealer’s used vehicle margin spread in three ways. The greater the pack, the greater the cost, the smaller the margin spread. Second, the presence of packs often spurs reflexive pricing decisions.Dealers will price vehicles above the market to make up for the pack cost they’ve added to a car.Put another way, they were handing over the spread to customers. They implemented training to help create a transparent sales process that calls for salespeople and sales managers to directly discuss the group’s market-focused approach to pricing — what I call “documentation as the new negotiation.” The result?They’ve added an average $200 in gross profit per copy in just three weeks, and the number’s still climbing.

in reconditioning, it would return

For these reasons, I recommend that dealers with gross profit concerns should re-evaluate, and potentially re-invent, how they handle reconditioning.

We knew, more or less, that if we invested $1 in reconditioning, it would return $1.25 for our effort and time.

Today, however, I’m not convinced this ratio holds true as a general rule.

When I see this, I’ll drill down to figure out why the cost-to-market is higher than it should be.

I often find a problem in one or more of the following three areas: In my day as a dealer, we didn’t worry too much about over-doing the reconditioning on a car.

||

For these reasons, I recommend that dealers with gross profit concerns should re-evaluate, and potentially re-invent, how they handle reconditioning.We knew, more or less, that if we invested $1 in reconditioning, it would return $1.25 for our effort and time.Today, however, I’m not convinced this ratio holds true as a general rule.When I see this, I’ll drill down to figure out why the cost-to-market is higher than it should be.I often find a problem in one or more of the following three areas: In my day as a dealer, we didn’t worry too much about over-doing the reconditioning on a car.To root out the source(s) of the trouble, I will closely examine the factors that make up the cost-to-market metric for a dealer’s inventory.This number shows the relationship between the total costs for a vehicle (acquisition, fees / transportation, reconditioning, packs, etc.) and the prevailing retail prices for the same or similar vehicles in the market.I’ve found this practice can shrink a dealer’s used vehicle margin spread in three ways. The greater the pack, the greater the cost, the smaller the margin spread. Second, the presence of packs often spurs reflexive pricing decisions.Dealers will price vehicles above the market to make up for the pack cost they’ve added to a car.Put another way, they were handing over the spread to customers. They implemented training to help create a transparent sales process that calls for salespeople and sales managers to directly discuss the group’s market-focused approach to pricing — what I call “documentation as the new negotiation.” The result?They’ve added an average $200 in gross profit per copy in just three weeks, and the number’s still climbing.

.25 for our effort and time.

Today, however, I’m not convinced this ratio holds true as a general rule.

When I see this, I’ll drill down to figure out why the cost-to-market is higher than it should be.

I often find a problem in one or more of the following three areas: In my day as a dealer, we didn’t worry too much about over-doing the reconditioning on a car.

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