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Jim Leman

Jim Leman Writing about dealer operations

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Your Finance Department’s Timely Role in Inventory Turn

One of the best practices for improving reconditioning results is to improve the flow of clear-title status communications between the finance and reconditioning departments.

This small improvement can help finance play an even more timely role in a dealership’s ability to improve inventory turn rate.

In a modern time-to-line and speed-to-sale reconditioning environment, even the sales and finance departments have a hand in getting cars frontline ready faster.

The best practice here is to have a Clear Finance alert between the finance and reconditioning departments. Clear Finance means the dealership now owns the title to the trade-in vehicle waiting for reconditioning.

Reconditioning started on a vehicle lacking title clearance can create problems for the reconditioning and the finance departments. Delays in bank loan approvals for the new car that generated the trade-in and lagging contracts in transit can mean cars processing through recon the dealership doesn’t own.

When that happens, and the unresolved clear-title status of that vehicle comes to light, management may choose to:

Pull that vehicle out of reconditioning to wait for the Finance Clear signal. Pulling a car out of the reconditioning workflow can slow down the delivery of sale-ready vehicles to the sales lot.

  • Continue reconditioning, absorbing any repair investments in that vehicle should that transaction need to be unwound due to the lender’s loan decline or another issue.

 

Either situation creates unproductive dead time in the dealership’s reconditioning workflow. Modern reconditioning is a race to get used cars that a dealer buys at auctions or as trade-ins mechanically and cosmetically inspected, repaired, and ready for sale. Any delay in this process slows this momentum, and as a result, the inventory turn rate.

Slowed recon may not seem tremendously significant, but Nicole Renninger, a former dealership F&I director who now provides dealership support for reconditioning software company Rapid Recon, says recon speed matters a great deal.

“How fast a dealer can recondition a car and get it ready to sell influences the profitability of a vehicle when sold. Delays in communicating clear title status to the recon department slow this process, which becomes a drag on inventory turn,” Renninger said. “And finance has more influence on recon speed than many dealers and managers consider.”

For dealerships where contracts in transit or deal unwinds are prevalent, adding a step to their reconditioning processes called Clear Finance may be necessary, she said.

Renninger noted these considerations:

  • State laws pertaining to title handling
  • Percentage of unwound deals
  • Percentage of deals with trade-ins
  • Finance department efficiency
  • The average dollar investment for trade-in reconditioning

 

“I have worked for KIA and GMC stores where this was a challenge, and for Cadillac stores where it is not,” Renninger said.

“The risk increases when vehicles are spot delivered and then finance is slow in submitting loan paperwork, or there’s trouble getting an ex-spouse’s signature on a trade-in title, all the while the consumer drives around in a vehicle they think they own. Whether dealers need a Clear Finance notification for recon depends on how much risk dealers want to take.”

Jim Leman has been writing about automotive retail variable and fixed operations since 1992.

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