By Curtis Sampson, Rapid Recon
As the supply of Grade 4 and 5 used cars continue to dwindle, franchised dealers will increasingly turn to lower condition -grade vehicles to supplement their lots.
“Condition of units [at auction] is trending toward the ‘edgier’ side with damage, dash lights illuminated, and vehicles running on red and yellow lights,” Black Book noted recently.
Can a dealer acquire these cars and still recondition them to make a profit? Yes, if done smartly.
Lower condition report (CR) units are not necessarily older, higher-mileage vehicles. They are two to four-year-old cars in rough condition, presenting at the auction or as lease returns having dents, scratches, bad brakes, torn seats, and other evidence of wear.
Chevrolet dealer and used-car best practices consultant Ed French said he’s now buying 2.5 to 3.5-grade vehicles for his dealership, 500 Automotive Chevrolet Buick GMC in Clinton, Indiana.
“We’re doing so for two reasons. There are fewer bidders on these cars because many dealers don’t know how to recondition them efficiently, and they’re more affordable for us to buy,” French said.
“Even in a white-hot market, value shoppers are still buying. When you can recon lower-grade cars right, they present as mechanically sound and cosmetically nice, not perfect,” French said. “If you’re using your recon software data correctly, you’ll get the answer to the big question, ‘Is there any juice in the squeeze left based upon what we would have to spend on it in recon?’”
Because these cars are likely to require more recon work and thus more time to get them sale-ready, it is wise to create a separate recon time-to-line bucket. Thus, these cars’ longer slower recon timed won’t skew the dealer’s typical time to line. Notify staff they won’t be docked for slower time to line results on these units.
Certain times require a paradigm shift. Dealers get in a mindset, driven by customer requests, that a vehicle needs to be near perfect, if not perfect. You’re not restoring used cars, but you are in the business of reconditioning preowned ones.
For edgier condition units that need a durable recon process, providing bona fide accountability, transparency and communication in every step are essential, for both inside your operations and with outside vendors. I cannot over emphasize the importance of having in place a robust recon process, the key to creating profitability from lower CR units.
Curtis Sampson is a new business manager for reconditioning software company Rapid Recon. He is a former dealer principal, general manager, and used vehicle director.