10 Steps for Used Car Dealership Performance

December 6, 2010

The following is a recent exchange that I had with JD Thalman of Motorscars Toyota. in Cleveland.  Hat’s off to JD, he’s turning his used car inventory 16 retails times per year and is still hungry to do even better.  I think there are valuable lessons in here for everyone. 

Dear Mr. Pollak,

I want to thank you for taking some impromptu time out of your day Monday to help me work through a few of the hurdles here at Motorcars.  I am convinced that if we keep moving in the current direction 2011 could be one of the best years we have ever had.  As we discussed I will need to sell a lot more vehicles making a little bit more on each one along the way but I feel we laid out a decent preliminary game plan to do so. A few of the most immediate changes are as follows:

1.  Reducing first few buckets from 15 day spans to 0-10 for the first and every 5-7 days after.

2.  Reducing profit margins earlier on. Only slightly by 1 or 2 percent. Being under 100% of market from day 1.

3.  Adding a “photo coming soon” image to cars within first 24 hours.

4.  Incorporating service work performed into every description.

5.  Slowly increase inventory levels starting in January. Increasing them until our turn rate dips to approx 12-13 times at which point we know we are at max selling capacity.

6.  Taking another look at adding AutoTrader’s “Early Model Premium” with increased inventory levels in January.

7.  Monitoring increases in business quarterly not monthly.  Making sure we are moving forward on a quarterly basis instead of forcing increase monthly.

8. Speaking to Jasen Rice about secondary views for handling and managing leads.  (He was very helpful by the way).  He sent a nice little Lead flow chart that is easily implemented and utilized.

9.  Discussing best practices with Russ Wallace.

10. Diversify inventory.

I had another question for you that I forgot to ask the other day.  I will be the first to jump for joy at the use of technology in our business.  I am still a firm believer that you have to wear your old school used car guy hat everyone once in a while with certain aspects of decision making.  I understand that vAuto tracks and monitors the internet and what is happening by the second.  I sometime still wonder if there is any use for tracking individual make and models based on turn time and profit for an INDIVIDUAL store rather than or using optimization tools based on and entire market.  I understand that Chevy might be 17% of a given market but I’m still not sure that I believe that stocking 17% of the inventory (Chevy) at a Toyota store is a best practice.  I still feel that there is a large human element involved based mainly on what sales associates are comfortable with.  I will not disagree that if vAuto says that 17% of all cars are getting sold in my area are Chevy’s then I need to be looking at Chevy.  What if there is a 300 used car a month Chevy dealer a mile away from me though?  I would tend to believe that trying to compete in the Chevy market with that guy would be crazy??  Food for thought.

On another note, I had a web based program written to track the life cycle of a used car from the second it is traded in until the second it hits the lot.  It time and date stamps everything every step along the way and is customizable based on a store’s individual needs and different locations it may need to send a car to get prepped.  I would be interested in showing it to you sometime to see if I could someday help dealers streamline their own processes reducing time from trade-in to front line and pinpointing the hang ups.

Again I thank you greatly for your time and look forward to working with you in the coming months.

Sincerely,  JD


I’m very impressed by you.  Your analytical thinking is extraordinary, and just what is needed in today’s used car environment.  The fact that you’re presently turning used car inventory 16 times per year is simply a testament to your unique abilities. 

First, you are absolutely right that a good velocity manager should never lose their gut instinct and judgment for the used car business.  There are and will continue to be situations and circumstances that a computer system simply can not recognize.  The trick, however is to find the right balance between trusting the data and your own judgment.  The best analogy for this balancing act is a pilot learning to use and trust instruments and blending their signals with their own individual assessment and instincts.  In other words, keep your old car-guy hat, just wear it on your head backwards.

Regarding your thoughts about keeping track of your history, it can never hurt.  The problem however, is that I just don’t think that it provides reliable on-going predictions about the future.  What makes any used car a good seller is a mix of how right you bought it and its current retail supply and demand.  There’s no such thing as a bad car, but rather only a bad price for a car.  Unfortunately, wholesale values as well as retail supply and demand are constantly changing.  For this reason, stocking based on historical patterns provides a lot of head fakes. 

Now, if you’re asking me whether it makes sense to stock a hot Chevy when there’s a large volume Chevy dealer down the street, I say why not?  Do you think that buyers of used Chevy’s feel compelled to buy them from franchise Chevy dealers?  OK, maybe a little, but not much.  There are however, a few makes that have very high degree of loyalty to their used certified brand.  I’ll let you use your own judgment as to which ones these are.  Such vehicles are referred to as “breeder cars” because shoppers of such vehicles do tend to want to buy them from the breeder, so to speak.  Subject to this limitation, I would not shy away from experimenting with other hot makes.  Remember that people who go out to buy that hot Chevy in your market will first go to the internet, and those internet search engines don’t care if you’re a Toyota dealer.  If you’ve got the hot Chevy they want, and it’s priced right, you’re likely to see or hear from that customer.

I would be very interested in seeing what you’ve created for tracking reconditioning.  I firmly believe that the reconditioning process is the last bastion of old-school used car dealer practices.  Simply stated, the reconditioning process must change from both a timing and expense standpoint.  Watch out, however, if or when you try and spread a message or sell a product based on this proposition.  Your trampling upon religious sanctimonious territory.  Most dealers are convinced that they don’t have a problem and that you are systematically trying to ruin their business.  In other words, lace ’em up tight if you’re going to run this marathon.  That said, yes, I would be very interested in learning everything I can about how technology can improve a dealership’s reconditioning performance. 

Again, thank you so much for reaching out to me.  I’ve learned a great deal from you and feel that a regular exchange between us would help in our mutual professional growth.