A great question from the dealer

November 26, 2008
Below is a question recently asked from a dealer, and my response to them…

Dale we recently signed up with vAuto and I have to say so far I love it.  I feel more empowered and have a greater understanding of the market conditions we’re in.  Or at least I feel more confident in this market.  But here’s my question: I have noticed a drop in gross profit. Is this something that most dealers have happen when starting to use vAuto as a pricing tool? We are down to 12 vehicles over 91 days.  Is this somewhat normal when trying to price to sell off aged inventory?

DP: This is absolutely to be expected, just think about it. First, as you’ve properly noted, you’re pricing old inventory to sell. The fact that it is old means that you probably own it for too much money and that obviously means that you’re average gross will be poor. The good news, however, is that the old stuff is gone and you avoided what would have been an even larger loss in the wholesale market.

Now that you’ve taken the medicine, the fun is about to begin. You can now go out and purchase vehicles really cheap (it’s a buyers market), price them aggressively, move them fast and do it over and over and over. You are taking the journey that many dealers fear or refuse to take. Follow the formula of buying right, pricing low, turn fast and you will experience the fruits of your labor.

The third phase of your journey is that you will achieve market dominance. You’ll find yourself able to sell cars for less than your competitors own them for. This is because you’ve taken advantage of a market in free fall while your competitors are stuck with old inventory that they own for way too much. Remember, a crisis is a terrible thing to waste.