These tips can help dealers maximize their profitability on the reconditioning process:
The first step always involves buying the “right” cars. In an effort to quickly fill their lots and close any gaps in inventory, dealers sometimes fail to take the time to do their homework. They ignore or fail to check resources such as CARFAX and AutoCheck and other reports that could signal that a car won’t be easy to turn a profit on. By neglecting this research, dealers end up with cars that cost far more to condition than they’d realized.
Begin with the end in mind
In addition to buying cars that meet a certain level of condition, dealers should only buy cars that have sufficient market appeal. They should take the time to consider whether the car will easily sell, even after reconditioning. This should be done as quickly as possible. Trade-ins can be somewhat more complicated than direct buys. Their retail potential should first be determined, followed by a daily review to determine exit strategies for that day’s trade-ins.
Establish a baseline reconditioning cost
The reconditioning process can be delayed if the work isn’t approved in a timely manner. Dealerships can successfully avoid this issue by establishing a baseline reconditioning cost for their vehicles. If reconditioning costs are expected to exceed this amount, managers should be alerted. They should respond quickly to texts or e-mails – ideally in less than two hours – to avoid delays. Reconditioning estimates should ultimately be matched against the final cost.
Increase reconditioning speed
The speed at which cars are reconditioned vary widely from one dealer to another. For some, repair jobs directly from customers understandably take a higher priority, pushing reconditioning efforts to the back of the line. Dealers can successfully handle this by creating a dedicated team to focus on reconditioning work that’s thorough as well as fast. Bonuses linked to speed and efficiency will give the team further incentive to streamline the process and work more quickly.
Cut costs effectively
Parts and labor costs can have a significant effect on profit margins for reconditioned cars. Dealers can use quality non-OEM parts for high-volume replacement parts such as wiper blades and brake pads to reduce costs. They can also charge less than retail for labor. Even a small decrease from the regular retail rates will minimize the total amount a dealer must recoup when selling the car. Finally, dealers should take a closer look at the cost of outside repairs such as small dent repairs and upholstery work. Additional oversight for these third-party vendors should emphasize doing what’s needed to make the car safe and attractive, but not overdoing the work.
Implementing these best practices will help dealers make the best decisions about which cars to buy as well as streamlining and increasing the profitability of their reconditioning processes. After putting these practices into place, dealers should periodically evaluate their success and make adjustments as needed.