The biggest deficiency in the dealership

March 4, 2009

As of late, I’ve come to understand that the biggest deficiency in the dealership today is the lack of expertise in sourcing used vehicles. For years, dealerships have relied on a steady stream of trade-ins. Only a small percentage of dealers actually developed strong wholesale sourcing competencies. Sure, most dealerships knew how to send their used car manager to the auction now and then to pick up a few cars here and there, but that’s a far cry from having true wholesale proficiency. I’m particularly struck by the lack of developed talent and process around the wholesale sourcing of used vehicles at some really large dealerships and enterprise groups. In fact, it is these dealerships that have the greatest deficiencies. Really large stores and enterprises historically needed wholesale sourcing competency the least because they had the most trade-ins.

I’m still not prepared to declare a “shortage” of used cars, because I believe that this term engenders the notion of a crises, and crises often evoke irrational responses. To be sure, there is not presently a shortage of used cars, but they are getting harder to find for reasonable prices. I think that it is incumbent on every dealership to assess its wholesale sourcing competency as we move through a year that will have a tightening supply of used vehicles.

The wholesale sourcing position does not need to be staffed by a full-time employee, as it can often be handled by a local wholesaler. Regardless, however, whether you use a wholesaler or full-time employee, there needs to be a lot of thought around how they are compensated and the criteria that they use to decide what to purchase and how much to pay.

I would strongly urge you to think about compensating such individuals not based on how many cars they buy, but rather on how quickly the cars they buy turn. This keeps your buyers focused on purchasing the right vehicles at the right price. Everyone should remember that it’s better to be light and right in inventory than long and wrong even in today’s used car wholesale marketplace.