Good Questions from the Field

August 15, 2013

Here’s a question and my response from an anonymous dealer:


I work for a dealer group that does not use vAuto. What would you recommend as a cost to market after shop and what is your best recommendation as your price to market? Thanks again for all your help. Also are there any plans to make Provision to use with auction genius for non vAuto customers?



Thanks so much for your question. With respect to proper cost-to-market, it is comprised of three components:

• What you pay to acquire the vehicle

• What you spend to recondition it

• What pack, if any

I routinely tell dealers that their cost-to-market average for their entire inventory for the first two of these components should not exceed 84% This is because your vehicles are generally transacting around 90% of market, and if your cost-to-market is more than 84% on average, you have less than 6% to cover commission and expenses. For most dealerships, this margin is not sufficient to create an acceptable return. Please note that the 84% mark applies only to the entire inventory and should not be used as a limit for any given vehicle. Some vehicles justify and require more than 84%, and other vehicles justify and require less, so it is the average of all to which the 84% applies.

With respect to proper price to market, it is difficult to state one rule that applies to all dealerships. First, it should be understood that every vehicle needs to be priced individually, but over 15 day age periods, there is a general profile that I like to see. Roughly speaking, I like to see vehicles priced in the first 15 days, on average, a couple points below 100% (average money). For example, perhaps around 98%. The second 15 days, I’d like to see a 2% drop, to perhaps around 96%. In the third 15 day age bucket, I like to see approximately 4% drop to around 92%. There should be no vehicles in inventory over 45 days. Note, however, that this general profile should be different if you have higher or lower than average market day’s supply cars. If the average market day’s supply of your inventory as a whole or in a specific bucket is greater than 75 days, then you should be more aggressive than that which I stated, and if your market day’s supply is less than 75 days, you’ve earned the right to price a little less aggressively, or a bit higher.

Finally, regarding the ability to access certain aspects of Provision in AuctionGenius, we are considering this as a possibility. AuctionGenius has an app store where we are thinking about offering selected elements of vAuto to AuctionGenius users for an additional subscription price. At this time, however, no firm decisions have been made, but I definitely appreciate the question and the desire on your part.

Thanks for reaching out and stay in touch.