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From: Jared Hamilton
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Jasen Rice

Jasen Rice Owner, Dealer Management

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Used Car Quick Tip 1 of 5

 

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Over the 9 plus years of consulting automotive dealerships on used car sales, I have seen too many good used car operations that have an average day of 30 or less and still struggle with gross and volume and there usually a common thread with these stores.
That thread is "date of last price change" and these "price change date" can go one of 2 ways: 

1. too many small price changes (their last price change would show they just changed prices a couple of days ago)
or the most common one 
2.
 they have not changed the price on 20-30% of their inventory in over 2-4+ weeks. 

To cover the first one, I believe that if you price the vehicle right the first time, you shouldn't have to do too many price changes. There are a lot of dealerships that just change a price of a used car just to change the price and keep their system clean. They change it a $100 here and a $100 there but never really change the market of that vehicle. I have had dealers drop the price $100 a week later raise it $75 to then drop it $100 again and so in a month period, that vehicles price to the market really never changed. This strategy has worked for some dealers but I find it to be more work then really being effective in the market and I would rather make bigger price changes $250-$500 every 2 weeks or so and be more strategic with price changes then to change the price every 5-7 days just to keep their system updated with price changes. 
That brings me to the 2nd price change date issue that I typically run into and that is not changing the price of a vehicle for weeks. I can ask most any used car manager how often do they change a price of a vehicle and they would always tell me that they look at pricing every day and that they change prices a couple of times a week. The catch here is that I asked them how often do they change the price of "a vehicle" not how often do they change prices. If this is a dealerships that is struggling with gross and volume, I could always go to their inventory (in vAuto), sort it by the last time that they changed the price by oldest date to newest and what you would see are cars that have not had a price change in over a month and those cars are usually 30-50 days old (see image above). 
Here is how this happens. 
The used car manager is juggling 20+ hats at the dealership so when it typically comes time to handle the inventory and pricing they are limited on their time so they focus on the 2 major areas of used car management. 

  1. fresh units
  2. aged units


1st, the fresh units, they need to get them through the shop, detailed, photo'd, commented, priced and that can take a lot of time. Then the 2nd area is the aged units because they need to get off the lot ASAP. 
And so when they are done managing these 2 areas, they are off to other responsibilities. This leaves the middle bucket cars untouched because they are not fresh any more and they are not aged yet (off their radar). This manager is usually good at handling age so he will make sure that they are blown out of the inventory when they get old and that causes the gross issue. Most of these stores will end up selling 20-50% of their used car inventory from 61+ day old cars which won't carry much markup by then. 
So even though this store could have a 30 day average age for their inventory, their gross and volume are lacking because of this "last price change" issue. More on the best practices of how much sold % should come from your 0-30 day old cars and how much % should come from your 61+ in a future post.

Tyler Larson
I have seen a stagnant inventory age with inventory using no price change, inventory with irregular price change, and inventory with price changes every 14 days. The customer knows they have the ability to find the perfect vehicle or the perfect money. The dealer should hold on those basics too. Be comfortable to let go of a possible high grossers, even if you want to wait 6 years for the money. Always learn what vehicles are moving, not moving, and learn it quickly rather than slowly. You may gross big on one and wait 6 months to do so or eighty big grossers with an average age of 120. You also may have found the right money on a certain unit and can sell through 6 of them for a calculated double the profit compared to that one unit. Carry successful cars and get rid of loosers. Food for thought you dinosaurs.

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