Last Sunday, my wife Nancy chaired the third annual Vision Walk at Soldier field in downtown Chicago. The event drew over 600 people and raised, so far to date, $203,000 for the Foundation Fighting Blindness (FFB). FFB is the largest non-governmental research funding source for degenerative retinal diseases, the leading cause of blindness in America.

This even was the culmination of a year’s worth of work that consumed Nancy’s focus and attention. It was nothing less than a labor of love for me and for that, I want to say thank you and I love you.

If you’d like to make a contribution -> Click Here!

Bob Tasca III, friend, dealer and world class funny car racer, invited my family and me to watch him race at the Route 66 Nationals in Joliet, IL. Tasca races a nitro-methane fueled, 8000HP Ford funny car that does 0 to 100 in .8 seconds. Yes, .8 seconds!! It covers the length of a football field, end zone to end zone (320’) in a half a second. The noise of the engine makes the ground shake, not to mention your eyeballs.

While we were there, we met some other racing champions, such as Tony Pedregon, pictured left in top

picture (by the way, Tony Pedregon won the event), and the venerable Frank Manzo, pictured center in bottom picture.

On behalf of my family and me, I’d like to thank Bob and his team for hosting us on a most memorable day at the races. If you haven’t seen funny cars race in person, I would encourage you to do so, it’s way cool. For more information, check out Tasca’s racing site at www.bobtasca.com.

Literally, every day, we are all watching gas prices skyrocket. There couldn’t be any environment that more dramatically highlights the fact that the theory of dealers stocking based on their “core inventory” is just plain wrong. If any dealer today stocked their lot based on their past core inventory, they’d be purchasing gas guzzlers and, quite possibly, avoiding the purchase of today’s hot selling, gas-sipping vehicles.

We are now seeing reports of both Ford and GM shutting down manufacturing plants that build their large SUV’s and pickup trucks and shifting production to more fuel-efficient models. What if Ford and GM were, instead, using the same philosophy that some companies are promoting to dealers for their used vehicle stocking? In other words, what if Ford and GM kept producing and stocking their dealers with “core inventory,” (i.e., lots of trucks and SUV’s)? They and their dealers would be guilty of the worst management malpractice imaginable.

Today, I spoke to a highly successful used car director of a large multi-franchise organization. His comments made me realize that the absurdity of “core inventory” goes well beyond the issue of gas prices. He said that, as an experiment, they stopped stocking used Infiniti’s at their Infiniti dealership. They experimented with high volume, off-brand vehicles, such as Impala’s and Malibu’s. I asked him if he was sure he knew what he was doing, and he told me that they were selling like “hotcakes.”

He said that we all get hung up on the notion that we should stock according to our past sales and/or in accordance with, our franchise brand. Yes, it may be true, he told me, that there is some natural traffic for these vehicles, but that does not necessarily mean that they are the most demanded products in the market. Properly used, the internet allows dealers to be successful with products that are hot, but not necessarily their brand or part of their past core. Remember, he said, that no used car manager ever got fired for not selling the right mix of used makes and models.

So why is it hard for many dealerships to do what my friend has done at his Infiniti store? I think that the answer lies in the fact that we are all more comfortable operating in a zone of comfort and familiarity. Think about how hard it would be for someone very knowledgeable and familiar with Infiniti’s to say, “there might be something better out there, and I’m gonna give it a try.” It must have been really hard for that Infiniti manager to go out and pull the trigger and buy a bunch of Impala’s and Malibu’s. It would be like waking up one day and putting your watch on your other wrist and deciding to part your hair on the other side. It’s just really hard to do! So we don’t do it, even if there’s a chance that it might work out better. It’s a lot easier for us to go with the inventory that we know, rather than venturing out and taking the risk associated with buying something different.

The good news for the industry is that there is now technology that can analyze any market and tell a manager, at the level of year, make, model and specific equipment, which are the hottest vehicles at the moment, based on volume and/or gross. It can even show you where to go to buy those vehicles. This takes much of the risk and uncertainty out of the equation. So if you haven’t seen this, you need to. In my opinion, it’s the only way to stay in tune with the market. And, to those that continue to advocate the message of “core” I say, “What in the world are you thinking?”

As you requested, below please find the 5 hottest gas sippers in your Portland market. As a client you, can get this information on your own in the future by using your vAuto stocking tool, based on any vehicle type, class, make, year or price range. Please let me know if you need to learn how and I’ll be sure to get assistance for you right away.

For what it’s worth, I see the Ford Focus coming up regularly almost everywhere in the country, in the category of top selling gas sippers. The used car market seems to really love this car.

I’ll be out your way in a couple weeks, and I’d love to stop by. Thanks for reading the blog and please feel free to contribute any thoughts that you may have.

Earlier today I got a call from Matt Lamoureux. I know Matt as the internet manager of Acton Toyota in Massachusetts, one of the most progressive and successful Toyota dealerships in the entire country. Matt informed me that he is no longer with Acton Toyota and is now the business development manager of Dealerrater.com. When he told me Dealerrater.com is a consumer service for rating dealerships, my stomach tightened in knots. I don’t have any of love for companies that make a business out of bashing dealers. As a dealer myself, I know that there’s two sides to every story.

Once Matt explained how dealerrater.com works, he completely changed my view. Rather than being a negative for dealers, Dealerrater.com, in fact, is really quite positive. Let’s face it, unhappy customers are much more likely to complain than happy ones. Dealerrater.com provides consumers with a place to vent and allow dealers to constructively respond. If the site just stopped here, that would be an improvement over a lot of other venues that don’t allow for a response by the dealer.

In fact, however, I learned that Dealerrater.com goes much further in the interest of dealers. If you don’t believe me, just go there and search for Acton Toyota. What you’ll find is that Acton Toyota encourages all of their customers to rate them on this site. The vast majority of respondents rate Acton Toyota extremely high. Now just imagine what a customer would experience that goes there to look for a good Toyota dealership. They’re likely to find that Acton Toyota is overwhelmingly the most consumer friendly dealership in the northeast and possibly the entire country. Even those negative comments that have been properly responded to by the dealership, in some strange way, appear to be positive. It’s a hard thing to understand until you see it for yourself. As it turns out, Dealerrater.com is one of the best lead sources for Acton Toyota.

I have absolutely no personal interest in this business and in fact, I never even heard of it until Matt called me, but I really like it. Third party rating services such as this one, carry a lot of credibility with consumers and I think really make a lot of sense.

I just concluded a conversation with Mike Miller of Bobb Automotive, formerly Bobb Chevrolet in Columbus, Ohio. He told me that they gave up their Chevy franchise because “it just wasn’t profitable.” He cited the fact that they had 13 competitors in a 45 minute radius and according to Mike, had to “just give them away.” With pressure to stock millions of dollars of new inventory, they simply concluded that it just wasn’t worth it.

They have a downtown location and they do about 150 used vehicles a month, mostly sub-prime business. Their web site is bobbsaysyes.com. I told Mike that it was very similar to a client of ours in Portland that has a secondary operation called dicksaysyes.com (not a joke).

Mike told me that he knew that, and in fact, copied the dicksaysyes.com website and marketing approach. He also said that in a recent publication, the dicksaysyes.com website ranked #6 and the bobbsaysyes.com website ranked 10^th on some survey of most trafficked automotive sites.

Mike also told me something frightening. One of their secondary sources, called Consumer Portfolio Services (CPS), recently took about 30 days to fund a batch of deals that had complete documentation and stipulations. He could only speculate as to the reason for the delay, but surmised that it might have to do with the liquidity problem in the sub-prime marketplace. I’m curious as to whether anyone else is experiencing similar problems, and if so, whether they understand the cause for the delay. Mike also told me that the secondary business is getting much more difficult because sub-prime customers seem to be slipping ever further into debt and unable to come up with even the most nominal down payments.

My discussion with Mike this morning is highly reflective of what I see out there in the market. Specifically, little opportunity to make any money, or even avoid losses in the new car business, and the growing importance of the used car business, particularly the secondary market. On an optimistic note, Mike Miller reinvigorated my confidence. He is a 53 year old, 9-year veteran of the automobile business that refuses to accept the status quo. He’s intent on improving the bobbsaysyes.com website and stocking model. He said that he has seen a lot of general managers in his operation come and go, some with good and some with bad ideas. In spite of it all, Mike continues to focus on the fundamentals and made a point of saying that he “tracks and measures everything.” I find that managers that track and measure are the ones that typically succeed in tough times.

By the way, Mike has had only one job in the automobile industry, and that’s with the Bobb Organization. Prior to joining Bobb, Mike owned a coffee shop. One day, when learning that the coffee shop was for sale, Mr. Bobb asked Mike what he was going to do. Mike said that he looked him in the eye and said, “I’m going to come to work for you.”

For the first 100+ years of the used car business, we’ve always adjusted our prices based on how long we’ve owned the vehicle. But I say its time to stop doing this. OK, maybe I don’t really mean that completely, but listen to what I’m about to say.

What if you had to choose: you could either pay attention to the age of the vehicle in inventory or its day’s supply in the market, but not both? My professional opinion is that you’d be way better off knowing the vehicle’s day’s supply in the market rather than how long you’ve had it in your inventory. Think about it. If you knew from the first day that you had a vehicle in stock that it had a market day’s supply of over 100 days, how long would you be proud of it? Answer this question: how long would you be willing to advertise a new vehicle for over market money if there was 100 day’s supply of identically equipped vehicles in your market? I think the answer is that you probably wouldn’t do it at all. So why are you doing it in your used car operations today? I can show any dealer that they have vehicles with 100+ market day’s supply being advertised for over market money.

The reason that our industry is willing to do this with used vehicles is that they don’t understand what it means to do business in an efficient market. An efficient market is one where buyers and sellers have relatively equal knowledge about their choices and alternatives. Given this definition, was the used car market efficient before the internet? No. We often got buyers to take cars home for more money than they would have if they’d only known where other similar ones could be found around town for less money. There were always such vehicles; it was just that they were not easily found. Today, is the used car market efficient and getting more so every day? Yes. The internet gives shoppers access to the information they need to be aware of all of the available choices and alternatives for every vehicle.

Now, think about this. Any market that’s efficient is governed by the same forces and principles. It doesn’t matter whether it is the oil, grain, cattle or automobile markets. If they’re efficient, they’re governed by the forces of supply, demand and price sensitivity.

In other words, now that the used car business has become an efficient market, dealers are either sailing on the seas with the wind at their back or in their face, on a unit-by-unit basis, depending on the vehicle’s supply and demand. When I say the vehicle’s supply and demand, I mean its current availability (exact year, make, model and specific equipment) divided by its average daily retail sales rate over the last 45 days.

Simply stated, if you have a vehicle whose demand outpaces its supply, shoppers will beat your door down, even if you price the car over the market and call it “ugly.” Conversely, the market will punish you if you take a vehicle whose supply outstrips its demand and price it over the market. The simple time-tested principles of supply and demand never mattered when the market was inefficient and customers didn’t know where other similar vehicles and better deals were to be found. Now that the market is efficient, I say that the vehicle’s day’s supply is actually a much better determiner of how proud your asking price should be rather than the calendar that marks the age of your vehicle in inventory.

I would appreciate your comments on this view (pro or con).

My vAuto travels have taken me to a lot of dealerships across the country. Frequent are the times when I get out of the car and laugh in wonderment about how my quirky brain got me to this out-of-the-way destination. Yesterday, while creeping thru the streets of downtown Manhattan, I wondered how much of my used car knowledge and experience applied to this urban jungle environment. I contemplated whether anyone would put themselves thru the abuse that I was experiencing to see a used car, much less buy it.

When Blair Creed, the General Manager of Mercedes Benz of Manhattan, introduced himself to me in the showroom, I quickly confessed that I may not have the right answers for his used car operation. He thanked me for my humility and ushered me thru a catacomb of hallways to his inner-sanctum office.

After a couple of hours I came to the realization, with the help of Blair, that while there were some peculiarities associated with selling used cars at Mercedes Benz of Manhattan, the business was basically the same as it was everywhere else in the country. Specifically, it’s much about the internet and good old-fashioned used car market knowledge. I was truly impressed with Blair and his team in terms of their openness to learn and their commitment to solid operational execution. My ride out of Manhattan was much more comforting than it was on the way in. This experience reinforced my basic belief that the principles of sound used car practices apply fairly equally from downtown Manhattan to Manhattan Beach, California.

With gasoline prices soaring, we all intuitively understand that gas sipping cars are quickly becoming the rage. I thought it would be interesting to take three markets, Los Angeles, Chicago and Tyson’s Corner, Virginia, and show you the top five gas sippers in each market. Note that the ranking is based on lowest day’s supply, in other words, the current available supply divided by the average daily retail sales rate over the past 45 days. These are the ones that people will beat your door down for, more than any others.

I can do this for any vehicle segment in any market. Let me know if you’d like to see data like this for your local market and I’d be happy to perform the same analysis, ie trucks, SUV’s, luxury cars, etc.

Of course they do. As long as you have a good profit margin on a unit that will sell in your location.

I had a great conversation with Dale last week. This is the meat ‘n’ potatoes of what we discussed.

“What is the days supply in your location?” This is the NEW first question you should ask yourself when deciding what to stock. Not “how cheap can I buy it?” If you make a poor decision and purchase a unit with a high days supply, your retail asking price may quickly turn back to a wholesale or worse.

I live in Georgia. In the winter time, our hardware stores and other retail stores don’t stock snowshoes. We don’t get more than a couple of snow days a year around here. No matter what the price, they probably wouldn’t sell (unless they get so cheap that I buy them all and ship them up north). Either way, it’s not a local retail.

You can’t rely solely on your store’s sales history. The market changes daily and it’s tough to follow (gas prices, economy . . etc). You can’t hope that just because you bought it cheap that it’ll sell. Interest and advertising can quickly take a unit from black to red. By compiling live internet data, Dale’s new Stocking Tool is the only thing I’ve seen that gives us the current information needed to make an intelligent purchase.

vAuto is the only proactive solution I’ve seen. The others just react to the market.

Thank you for giving this market some perspective Dale!

Colin Blackledge - Milton Martin Toyota