The faster dealerships can get their cars retail-ready and on the lot, the more money they stand to make.
- Recon delays cost money
- Measuring retail-ready time is essential
- The right software can help
There’s no secret when it comes to making money at a used car dealership: Acquire vehicle and sells them to customers for a profit. However, the longer a vehicle takes to reach the lot, the less money the dealership stands to make. This reduced income comes from cost erosion, which eats into profits each day a vehicle sits unsold.
There are many reasons for cost erosion, including reconditioning costs, but the time to turn is the central aspect that can decrease dealership profitability.
Streamlining the retail-ready process is essential for dealership managers who are serious about making sure their operation thrives.
Delays cost money
Reconditioning vehicles always costs dealerships money. However, the process can eventually cross the line from being an essential investment in preparing inventory for sale to a prohibitive factor that reduces profits.
Generally, managers want their vehicles to hit the lot within two or three days. This metric might not be possible with every car, but it’s a goal worth working toward to maximize profits.
Daily holding costs are between $40 and $85 per vehicle, depending on the vehicle and your market, so this isn’t an insignificant amount of money. Conservatively, a $40 daily holding cost per car can add thousands of dollars to the dealership’s expenses every month when you have hundreds of cars moving through your lots.
Delays in the reconditioning process can increase your retail-ready time from three days to 12 to 15 days, so you can see how much money is at stake because of slowdowns.
The solution is to measure the retail-ready metric on every car the dealership acquires. That way, you can compare your dealership’s speed to baselines and, from there, figure out where improvements are necessary.
Reducing the retail-ready time
One of an automotive general manager’s goals is to reduce the retail-ready time on every vehicle that arrives on the lot. Of course, this feat is easier said than done because there is so much that goes into the process.
For starters, estimates are necessary to determine the essential work. This work then requires approval before the service department can begin.
This service could include bodywork and mechanical repairs, so the car may have to move between locations. It could also require detailing, cleaning, and a windshield replacement.
Another factor to consider is whether the dealership can handle all of the recon work on-site. In some cases, dealerships send cars to third-party vendors for repairs, which can further delay time-to-retail.
Each of these departments and vendors must work together and communicate in real-time to reduce each car’s retail-ready time, which is a significant challenge for managers to meet.
Tracking the process helps
Since each car that a dealership reconditions moves to multiple locations, many times on the same day, keeping track of where the vehicle is at any given time requires a lot of communication.
For example, if a car starts in the autobody shop before moving to a mechanic, that mechanic should know the initial repair’s progress and when the vehicle is due to arrive. The same goes for an off-site vendor, which must know when the dealership requires its services and move to complete the job as quickly as possible.
One problem: Al of this extra communication adds more space for human error. In some cases, a mechanic or autobody repairperson could forget to inform people in the next stage that the vehicle is ready.
If this information doesn’t reach the right people or experiences a delay for a few hours, it significantly slows the reconditioning process. And when you’re moving hundreds of cars per month, those hours add up.
One potential solution involves using automated software to track as much of the recon process as possible. In doing so, you can eliminate human error and streamline the workflow.
Invest in the right tools
Fortunately, there are tools available that automate much of this workflow and keep all parties informed of every vehicle’s progress. The more information every vendor and department has, the easier it becomes to move a car through the recon process.
Adequate software provides real-time updates that everyone involved can access, eliminating the need for employees to provide information and making it possible for managers to hold every employee accountable for delays.
ReconVelocity has the software to revolutionize your entire recon workflow and accelerate the time-to-retail. This tool can reduce your recon time to between two and four days, maximizing profits and increasing inventory turn rates. Contact us to request a demo or speak with one of our recon experts.