Dealers should closely examine their reconditioning procedures and policies to make sure they’re actually contributing enough to the bottom line. It’s obviously still important to make sure used cars are safe and meet certain appearance standards, but dealers should consider making the following changes in their reconditioning process:
Pre-approve Work Done by Outside Vendors
Dealers often have good working relationships with vendors who take care of dent removal, upholstery work, and other reconditioning work. Sometimes this translates into vendors having carte blanche to do the work they deem necessary and simply present a bill or purchase order after the fact. Today’s dealership or service manager should take a more active role in inspecting cars and approving work in advance. With profit margins becoming increasingly thin, costs should be carefully evaluated rather than being automatically approved after the work is done.
Stop Charging Retail Costs for Reconditioning
Dealers commonly add on the retail cost of conditioning by their service departments when determining a vehicle’s ACV. This can add a substantial amount of money and cause the dealer to pass up on cars that could help them make a profit. The process lets the service department make more money on each reconditioned vehicle, but it doesn’t do much to help the dealership overall. By not charging full retail, service departments are likely to receive as much or more profit in the long run. They might make less per vehicle, but their volume is likely to be higher, and departments will have a greater opportunity to build long-term service relationships.
Consider How Reconditioning Work is Paid
Incentives can help increase the production and performance of those who perform reconditioning work. Changing the way dealerships pay their reconditioning staff may also help. If workers are currently paid hourly, dealers should consider paying them a flat rate per car. This will help create a direct correlation between the work performed, profits achieved, and the pay received. Workers will have an incentive to perform the work reasonably quickly.
It’s today’s world, the old-school methods of tracking reconditioning costs and profitability aren’t the fastest, most accurate ways to gauge success. Dealers should utilize new technology such as ReconTRAC, a software program that tracks the entire reconditioning process. Each step of the way, departments will be accountable for how much money and time they spend on each vehicle. The Cloud-based software gives dealers the ability to pinpoint any inefficiencies and correct them to create a more seamless, profitable reconditioning process.
Dealers today can’t take it for granted that their reconditioning efforts will turn a sufficient profit. Evaluating each element of the process will ensure that profits are maximized in both the short and long term.