Thankfully NADA is back in person this year, and that gives all dealers a great opportunity to meet face-to-face with their vendors. Many traditional best practices have taken a back seat to widespread worries over inventory and hiring – like vendor reviews.

Yet, regularly reviewing what you’re paying for and what you’re getting in return could uncover duplicate services or lackluster results that once resolved could save thousands of dollars every year.

You can bet your vendors are eager to meet with you at NADA, so now is the time to prepare.

Best Practices before NADA

• Get started by compiling a comprehensive list of all your vendors – from lead providers to your CRM, websites, and pretty much anything else you’re paying for. Pull a report from your check register or run a DMS vendor report.
• Find and review contracts and create a spreadsheet with contract renewal dates. Many dealers are moving contracts to a third-party document management platform, which makes a lot of sense. Instead of digging through paper files, it only takes a few keystrokes to create spending reports and stay on top of auto-renewals.
• Look for extraneous vendors and duplicate services. You may be paying for a service that your OEM provides for free. Or paying two companies for the same marketing services.
• Audit every vendor for ROI, using your own statistics. Don’t blindly trust what a vendor tells you about its performance.
• Contact vendors you want to meet with at NADA (they’ve likely already reached out to set-up meetings), and schedule a time to meet.
• Research alternative vendors if a particular service or product doesn’t seem to be delivering for you. Contact these vendors and schedule a quick meeting and/or demo.
• Create a list of questions and/or concerns you want to make sure to discuss.

Best Practices during NADA

• Arrive at vendor booths armed with your list of questions and KPIs.
• Be prepared to voice your experience, whether good or bad, and give vendors a chance to correct problems. Obviously, improvement will not happen on the show floor, but it sets the stage for vendors to improve quality moving forward. You don’t want to go through lots of vendor churn, so it’s important to save relationships when you can.
• Don’t be afraid to ask the tough questions, such as: What are you doing to advocate for great customer service? Or, what is your procedure in the event of a ransomware attack? Or, what happens to our data if we switch DMS providers? Your vendor may not have all the answers right away, but after the show they will certainly follow-up. Those who don’t may be signaling your business is not that important to them, and so you’d be better off researching competitors.
• Finally, be prepared in the event you decide to terminate a vendor. While this is not likely to happen on the show floor, a clean exit strategy can prevent potential problems down the road. Consider a termination checklist that details what you expect from the vendor, such as returning all collected data and relinquishing access to software systems. A termination process will smooth vendor transitions.

Vendor management is arguably more important than ever as dealerships seek to do more with less. It’s easy to forget with so much change and disruption in our industry, but a hard look at your vendors can save you money and get you better performance. A return to an in-person NADA show is a great opportunity to meet face-to-face and ensure your current partners are your best option moving forward. Start preparing today!

Did you take a road trip this summer? If you did, I bet you took your car in for a service before you took off. It’s common sense to prioritize maintenance to avoid problems down the road. This common-sense thinking can easily carry over to one of the hardest working machines in your dealership: your scanner. Strict adherence to scanner maintenance ensures optimal scanner speed and accuracy, and increases the longevity of this expensive piece of equipment. 

Whether you have a professional Scanning Operator (which I highly recommend) or members of your team take turns scanning, it’s crucial to have a maintenance schedule prominently posted and to hold your team accountable for cleaning tasks. You can also set-up a cleaning schedule in Excel and set recurring calendar reminders so tasks don’t slip through the cracks. Here’s what needs to be done on a daily, weekly, and semi-annual basis:

1. Daily Tasks

Paper dust is the enemy of your sharpest, best scans, and it accumulates daily. Wiping the lenses, pads, rollers, and feed mechanism will only take a couple of minutes. Use a microfiber cloth and manufacturer-approved cleaner. Spray cleaner onto the cloth, not directly on the scanner, and let the glass dry fully before using.

2. Weekly Tasks

The paper chute and interior rollers and sensors should be cleaned on a weekly basis to avoid error messages, ink residue on scans, and misaligned documents. To clean the paper chute:

1. Turn on the scanner, press the menu button then use up and down arrows to select Cleaning, then press Enter to confirm.
2. Spray cleaner on the cleaning paper.
3. Load the cleaning paper in the chute and press Enter. Feed the paper through the chute a few times or until excessive residue appears on the paper.

To clean the rollers:

1. Open scanner lid and locate the Brake, Pick, and Idler Rollers
2. Carefully, remove the brake roller from the scanner (Pick and idler rollers should be left in the scanner and manually rotated when cleaning).
3. Use a cleaning wipe to clean off any dirt or dust along the grooves of the roller. Be gentle to avoid damaging the roller grooves. Be sure to remove all visible residue as feeding performance can be affected by any black residue left on the rollers

Semi-Annual Tasks

Brake and pick rollers generally need to be replaced every year, or every 200,000 sheets scanned. If you notice one of these issues, it’s time to order replacements:

1. Scanner displays “It is about time to replace the consumable,” error message.
2. Scanner has trouble grabbing paper.
3. Scanner regularly pulls multiple pages at once.

Keep in mind your team should only be using the proper scanning kit for cleaning. Check your scanner model to be sure you’re ordering the correct kit. Each kit includes cleaner, cleaning paper, and cleaning wipes. Using anything else may cause problems instead of solving them.

You rely on your scanner to produce detailed images of dealership documents. Routine maintenance is part of keeping it running at optimal performance. Easily avoid common issues by taking care of it on a regular basis.

In my former life as a Controller, I was always aiming for a fast and accurate month-end close. Our business office typically closed the books within five to seven days. Is that a realistic deadline? Not according to Christine LaFontaine, Owner & CFO of Matt LaFontaine Automotive, which owns three dealerships in Michigan. Christine, who is also a former Controller for a 13 store group with 21 franchises, believes that it’s frankly too MUCH time. How many days till a full close you ask? "Two days."

Christine's dealerships consistently finish closing their books on the second day of the month; and for good reason. Having accurate information sooner gives management more time to analyze what went well and what didn’t for better decision making, reveals items of interest that may be affecting the bottom-line, and allows the entire group to move forward instead of dwelling in the past for the first week of each month.

There are two big reasons many dealerships struggle to close their books quickly: lack of pressure from the top and co-worker buy-in. A Controller can’t do it alone. A two-day close requires that the entire dealer group be on the same page because a lack of data from one department can delay the entire process.

Beyond setting dealership-wide expectations and getting management on-board, LaFontaine has several recommendations that other groups can follow to achieve a two-day close. These include:

Start early and clean schedules continually. LaFontaine works schedules weekly, and even daily, when it comes to busy departments like service and parts. “People post and make mistakes so the schedules all get worked at least once a week,” she said. “It’s much easier to catch mistakes, like someone writing a check that they shouldn’t have or an expense posted twice, on an ongoing basis rather than trying to do it all at the end of the month. Keeping things clean is much less stressful and it works.”

Use a check-off list. LaFontaine swears by her check-off list that breaks down month-end procedures into smaller tasks. Each task has a due date and it is segmented by weekly/monthly action items. Due dates are set in stone, so the last few days of every month are spent fact checking, clarifying information, and getting memos together, not scrambling for data. Departments work together to complete items since they all have an interest in getting paid properly and on time.

Estimate payroll accrual and bonuses at the beginning of the month. This recommendation is a major mind shift from my days as a Controller, but LaFontaine swears by it. She has an Excel spreadsheet for each salesperson and everyone in F&I and uses current payroll and bonus estimates to populate the sheets. “It doesn’t have to be completely correct,” she said. “Our pay plans are not hard so my estimates are very close.” She explained that management likes this approach because income and expenses are matched in the month they occur, regardless of when money changes hands.

Look at trends. LaFontaine relies on trend reporting in the group’s DMS to catch accounting errors and make them right before too much time has passed. “I can see 12 months of activity,” she explained. “So, if there’s an expense that’s $100k more than the month before, for example, I can ask questions of the department. It’s a double-check for everyone and people appreciate it because they get paid on the bottom-line, and they need to know what they’re getting paid on is proper.” 

Get vendors on board. LaFontaine communicates to her vendors how important it is to have invoices and month-end statements in on time. She stresses this is integral to working with the group, but there are challenges. “Paint inventory can be painful, but I stress how important it is to come out on time and get the work done,” she said. “Every once in a while, we have a blip with a vendor, but when it comes down to it, we’re the customer and they need to make us happy.”

Reward your team. Closing the books is a team effort so it pays to encourage and reward employees for a job well-done. LaFontaine celebrates with a pizza party for the entire dealership. “We talk about the month and reward with cash one ‘everyday hero’ who really stepped-up,” she explained. “We need to give people a high-five because we all work very hard. It pulls us together as a team and gives us a chance to talk about how we did and how we’re going to move forward.”

When I was a Controller over five years ago, closing the books within seven days was the norm. Now I know that’s old-school thinking. Controllers like LaFontaine have found that starting early, getting department and management buy-in, taking advantage of technology, and rewarding the entire department for a job well-done, can result in a two-day month-end. Now it’s your turn.

Growing up in the 80s, I loved the A-Team. I thought they were the coolest; even the van was awesome! Ultimately, what made them great as a team was that they worked better together. The "better together" philosophy can easily carry over to a different A-Team: the "Accounting Team.” It simply makes fiscal and operation sense to round up your team and transition to centralized accounting.

Getting your house in order and bringing everything under one roof will help you weather industry ups and downs right now. The coronavirus is still a threat, several manufacturers just announced production interruptions, and no one knows when things will get back to “normal" (if that even exists anymore!).

A hub-spoke system for your accounting team, where the majority of office staff are in one location and each store has one accounting support system, delivers more common sense benefits.

Efficiency and consistency

Nothing makes a controller's heart happier than a quick and streamlined month-end close. When you are operating locally at every dealership, you are at the discretion of the controller of that store. Working centrally, you can implement the same time-saving processes at each location. Payroll, accounts payable, inventory management; all can be streamlined by removing redundancy.

In addition to time-savings, you gain consistency because everyone is following the same processes. Operational errors, and the risk of something being “swept under the rug,” are both less likely. Centralization helps staff do their jobs better, which improves morale and helps fight employee attrition.

Precise document management

Every stores' month-end data, reports, and physical documents must be properly stored to meet all regulations and protect you in the event of an audit. A centralized accounting office follows the COLDing process more consistently because employees work together in a more coordinated effort.

Also key to breezing through audits is proper scanning of sales and service documents. Managing entry-level employees at each location to scan can be difficult. Mistakenly piggy-backing documents together, missing items in a deal jacket, or creating unreadable scans can all have a direct impact on your bottom line and the liability of your dealership. Consolidating scanning in one place gives you more control over the process and the peace of mind that a trained professional is safeguarding critical information. Most of this information requires to go through accounting any way (think warranty processing and deal postings); why not take this time to scan it?

Effective vendor management

One of the more difficult things to control as you scale is the hundreds of vendors. Keeping track of each agreement can become basically impossible if you have the autonomy for each local store to have control. Additionally, you can bet that you'll end up with redundant vendors or inconsistent pricing structures.

Centralizing vendor management gives you more power to negotiate better contract terms, weed-out duplicates, and gives you the data you need to pinpoint and cut loose vendors with lackluster results. Centralization also eliminates the frustration of a store auto-renewing a contract that you’re now stuck with for another year. Every contract in the group passing through the same approval process will lead to improved bottom lines and better protection.

And don’t forget your DMS. Consolidating your general ledger may lead to a substantial reduction in your DMS bill.

Over countless episodes, the A-Team proved they could get more done together than by working alone. That lesson applies to your accounting team. When you centralize accounting in one location, you increase efficiency, accuracy, and save money.

As the fable goes, a frog put in a cool pot of water that is slowly heated will happily hang out until its eventually cooked. The gradually changing temperature fools it into thinking conditions are not changing. When it comes to your DMS provider, you cannot be complacent like the frog.

There are many great providers out there who deserve your loyalty, but the DMS space continues to generate headlines with more acquisitions and consolidations coming left and right. You’ll remember DealerSocket bought Auto/Mate last year, only to be acquired by Solera this year. That was the second acquisition for Auto/Mate in just two years.

And they’re not just buying each other. Many are snapping up third-party providers too. Back in 2018, CDK dropped over 100 members of its support staff to, as its managing director stated, “align itself with a growth strategy,” then announced it was acquiring Elead.

This past spring, CDK bought Roadster and R&R bought Gubagoo, to offer digital retailing tools to existing customers. The cynic in me has to wonder if in the future these big guys will require their dealer clients to use the platforms they now own.

With so much movement in the space, it’s prudent to keep a keen eye on your DMS vendor. After all, although vendors talk about putting customers first and wanting to be your “partner,” they are businesses with balance sheets to monitor, and in many cases, shareholders to please. 

Don’t get me wrong; change via acquisition or consolidation is not always bad; these can lead to increased functionality or value. What is bad is when it catches you off-guard and a provider you considered a “friend” gradually introduces new ways of doing business that don’t work for your dealership.

As with any relationship, you should be cautiously aware of warning signs. Even if everything is great today, be vigilant of your DMS changing in the following ways:

• Change in contract terms – DMS vendors will always push for a longer contract length - that's just good business for them. You should be alarmed if the DMS forces longer contract terms, without an off-setting benefit to you, like lower prices or increased services. Don't be forced to scratch their back without them scratching yours.
• Deviations in support – CDK likely cut support employees before acquiring Elead because it needed to trim payroll or because workers were redundant. Either way, deviations in the level of support is a signal that change may be coming.
• A new primary strategy – Most companies have a primary business strategy, such as cross-selling more products, offering the most innovative tools, or delivering the best support. A company moving away from stellar support and toward pushing more products, for example, is an early sign they are prioritizing revenue over customer satisfaction.
• A change in leadership –Be on the lookout for executives moving from one DMS to the next. Those executives will be bringing their playbook along – and may implement many of the negative company practices you have been trying to avoid.
• Changes in product offerings – CDK and R&R saw market openings when they purchased digital retailing platforms, especially since the pandemic sped up dealerships’ adoption of technology to power remote selling. There’s no harm in offering more products. The harm comes if vendors require customers to use those products.
• Restricting third-party vendors – Dealertrack DMS and others make a big deal about allowing dealers to work with preferred third-party vendors. Starting to restrict certain vendors is the flip side of requiring certain vendors. Be wary of both strategies to restrict how you run your business.
• Changes in data retrieval – Some vendors have a reputation for essentially holding a dealers’ data hostage if they try to make a DMS switch. If your vendor starts to get cagey about how you retrieve data and/or how much it will cost, that’s a red flag that a change you may not like is possible. Be straightforward and ask the cost outright; if your vendor can't give you a straight answer, be wary.

Now for the good stuff. There are plenty of vendors in the market who exhibit integrity and best practices that put dealers first, even if these vendors are interested in being acquired.

A DMS to stick with may exhibit these signs:

• Offering more products – A DMS that is continually innovating to bring you new products is working for you, not against you. A good partner DMS will educate you; not upsell you.
• Integrating more third-party vendors – You should be able to work with companies that are best for your business. A DMS that understands that and works to create new relationships with third-parties is good for your business.
• Contract Flexibility –A DMS that doesn’t push contracts understands continual improvement, stellar functionality, and hands-on support, are required 24/7 to keep a client base. They work harder to keep you happy, which only benefits you.

As the DMS space continues to generate headlines, it’s smart to remember the fable of the frog and stay vigilant. Change can be good, but only if you’re aware of it and on-board. Otherwise, you may end up with a solution that is no longer a best-fit for your dealership. 

Service warranty audits are back – some dealers say with a vengeance, according to a recent Auto News article. Others consider the return of audits, now that the pandemic has eased, to be business as usual. Why do some dealers find it easy to stay on top of compliance while others panic when a warranty auditor sends them notice?

I’d suggest it’s largely a matter of process and document storage. We all know the warranty-claims process is still very paper-intensive - which can lead to lost documents. Dealers who don’t have an iron-clad process for electronically managing their documents are putting themselves at risk. As a dealer once told me, “They might as well grab a gallon of gasoline and burn it all.”

To further complicate matters, these past 15 months have caused a total disruption in day-to-day operations: people have left the dealership, COVID-precautions have changed long-standing processes, many dealers have tried to implement electronic processes to compliment the overall document process, with varying degrees of success. I think it’s safe to say manufacturers understand the situation and may be looking to capitalize on it.

Manufacturers know these changes have increased the likelihood things are slipping through the cracks. The increase in audits are the natural result of that likelihood. If you aren’t prepared with a document management process that has strong checks and balances, you are setting yourself up for failure.

You can get your house in order and turn warranty audits into no big deal. Here’s what I suggest:

1. Train service employees and hold them accountable. You wouldn't take a road trip without a map. You cannot hold your team to a process if that process isn't written down and clearly documented. The warranty process is complex and service and parts employees must be properly trained on documenting hours and repair work. Just one employee not following the process could cost your dealership thousands of dollars. Properly trained employees should have no problem following a “no exceptions” process for paperwork and for warranty work. It’s fair and prudent to tell new hires that committing warranty fraud or performing unnecessary work will get them fired. No warning and no second chances.
2. Invest in electronic document storage. Overflowing filing cabinets and stuffed document boxes are a recipe for disaster. Just one missing document could cost your dealership an expensive chargeback. Web-based software that allows you to scan and store documents electronically is a simple solution with a big payoff. All documents are instantly available with a quick search which allows you to compile required auditing materials in seconds instead of hours.
3. Hire a professional scanning operator. An electronic storage system is only as good as what you put into it. The old adage holds true: "Garbage in, Garbage out". Even the best storage system can’t compensate for sloppy scanning. It’s well worth the time and money to hire a detail-orientated professional and invest in training because proper document scanning is the linchpin of a successful storage program. The role has a direct impact on your bottom line and dealership health and should not be assigned to a low-level clerical employee. You can find tips for hiring a Scan Operator in my previous blog about the most important dealership hire in 2021.
4. Designate a compliance officer. Routine self-audit reviews are one of the best ways to ensure your program is compliant when an actual audit happens. Designate an employee as a compliance officer and task him or her with regularly (weekly or monthly) spot checking claims and pulling a few job cars to check for complete, accurate information. I’d recommend this person not be the service manager or warranty administrator to keep the process honest. You’re also adding to this person’s workload so consider extra compensation to make the job attractive and motivate proper actions. One idea is to award a bonus for a clean audit.

After mostly shelving the process in 2020, warranty audit visits are back. While automakers may be less forgiving this time around, that doesn’t mean you need to panic. Follow the four steps above to get your house in order and it will be business as usual when an auditor shows up at your door.

“Inspect what you expect” is a well-known business phrase that I think is particularly applicable to our industry today. That’s because many dealership employees have a LOT of time on their hands right now. Why not re-direct that time towards everyday tasks that you expect are getting done, but often don’t have the time to inspect?  

Our unprecedented market, with virtually no new cars on the ground and used cars impossible to come by, has left many dealership employees sitting idle. While experts predict vehicle supply won’t return to normal until the first quarter of 2022, you don’t want to let go of core staff because the market will calm down.

I have spoken with multiple dealers who are repurposing some of that employee downtime into completing useful but often delayed house-cleaning tasks. Will the employees probably complain? Sure. Is it a great use of downtime? Absolutely.

Here are six tasks to keep employees busy and, more importantly, help your dealership with organization, compliance, and safety:

1. Cleaning and organizing deal documents – When you’re busy closing deals it’s easy for business office and dealer forms to pile up and become disorganized. But in an industry as regulated as ours, you can’t afford messy paperwork. Have you staff audit some deals; ensuring proper signatures exist, certain forms exist, and the deals are organized a in consistent manner. A little TLC on your deal jackets will unquestionably lead to increased productivity when that deal needs to be reviewed in the future.
2. Scanning files – Instead of multiple filing cabinets, stacks of paper, and countless folders, now is the time to contract with a third-party document management company and go digital. If you already have a scanning department but have fallen behind on digitizing documents, now is the time to catch up. I’ve spoken with dealers recently who are temporarily adding scanning stations to clear backlogs. One word of caution: proper scanning requires some training. Every document in a file must be legible, in the proper order, and labeled correctly. Sloppy scanning with missing pages or illegible information could result in hefty fines if auditors come calling. Before re-purposing employees to a scanning station, conduct internal scanning training to keep everything on the up and up.
3. Validating OSHA requirements – Every dealer is required to have an emergency action plan to comply with OSHA standards, but when is the last time you reviewed yours or shared it with your employees? Assign an employee to review and validate your OSHA compliance. OSHA offers a free, on-site consultation program that can help take your safety programs to the next level if you find deficiencies. Additionally, audit your documents to ensure you have properly stored all the necessary employee documentation, like training certifications.
4. Validating Red Flag compliance – Every dealer is also required to have a written Identity Theft Protection Plan. Now is an opportune time to review and validate yours. Due to the changes in how consumers purchases vehicles caused by COVID-19, identity theft more than doubled in 2020 as compared to 2019. A thorough review and update of your plan is a smart move to protect your customers and also your dealership against fraud.
5. Conducting perpetual part inventory counts – Any employee can count parts during slow times. Assign each person a bin. Then, anytime employees have an hour or two of idle time, they can count their assigned bins. Regular physical audits are a boon for your bottom line because they reduce inventory costs from theft, waste, and obsolescence.
6. Spring cleaning – You may not be asking your employee to grab a mop per se, but it’s always a good time to do some deep cleaning. Check cabinets, desk drawers, closets – trust me: you'd be amazed where critical, auditable documents can end up!

Take advantage of the market slowdown by re-purposing employees to inspect and improve tasks and processes that are often put on the back burner during busy times. The payoff will be a better organized, compliant, and safe store that’s ready to hit the ground running when vehicle supply rebounds.

Floor planning is not a new topic; but it’s gotten a lot more interesting lately. As Auto News reported in a recent article, floorplan swung from a $96-per-vehicle-expense on average in 2019 to a $140-per-vehicle gain last year. The gains are attributed to slim vehicle inventories, low interest rates, and credits from OEMs.

Unfortunately, this is probably a one-time thing. OEM subsidies have died down, and gains made from new vehicle floorplans are going to be offset by high used vehicle floorplans.

We’re also likely looking at a permanent change in our industry when it comes to inventory. Many experts predict we’ll never go back to high, high levels of inventory and slower turn. I believe this is a good development for our industry. Excess inventory is a waste and accrues unnecessary interest expense.

With so many factors in flux, a hard look at your floor planning is in order. Get started with these proactive tips:

Audit your floor planning – Audit your floor plan lenders and interest rates. Record-low interest rates mean now is the time to renegotiate. Research what various financial institutions are offering and compare against your current lender. You may be able to get a better deal.

Beware of overleveraging on used cars – Sky-high demand for used vehicles has many dealers paying up to 120 percent of market value. That’s not a problem if you can turn those vehicles quickly for a profit. But beware of changing market conditions and buying the wrong vehicles. The market will correct as OEMs push out more new vehicles. Floor planning an expensive used vehicle that sits on your lot may result in a debt burden that wipes out any profit. Ensure you’re only buying your core used vehicles – those that turn quickly for higher than average profit – and be ready to re-price quickly if the market changes so you don’t take a loss at auction.

Monitor your curtailment period – It’s likely you pay interest-only on your inventory for a certain amount of time. After that, your curtailment period kicks in and you’re paying both interest and principal on the loan. Your curtailment period also runs for a certain amount of time. If that time runs out and the unit is still sitting on your lot, the lender has the right to demand full payment. It’s crucial to stay on top of these timelines. Miss a deadline and your costs can go up precipitously. This may not be a big concern at the moment but it will be when the bubble bursts.

Stay in trust with your vehicles – Selling out of trust can be a criminal offense, leave you vulnerable to civil litigation, and even cause you to lose your dealer license. Dealership groups that divert money away from paying loans and toward other business expenses may have grown too quickly or had poor cash management strategies. If you’re facing a cash crunch, one of the worst things you can do is let a few vehicle sales go out of trust and expect to make it up the next week. Experts know how quickly that can snowball. If you’re struggling, reach out to your lender first and see if they will work with you. Most will help guide you through difficult times. Going out of trust can also happen under the radar. An Auto News article reported on a dealer who went out of trust because his business manager quit and the replacement, new to the industry, thought it was okay to prepay trades and let the flooring loan float for a few days.

Research floor planning solutions – As a former Controller, I know how time-consuming managing floor planning can be. Excel simply isn’t up to the job. Take the time to research floor planning solutions that manage your data, and also help audit to ensure your balances match up. Nobody is perfect and a small discrepancy can become a big problem.

Our industry will always rely on floor plan lending to keep new and used cars on the ground. The uncertainties of today’s market present opportunities to manage and retool your floorplan to keep expense down and minimize risk as our industry changes.

A drive around town quickly identifies an odd reality: dealers’ lots are bare bones. It is honestly shocking how few new cars are on the ground. As new car inventory continues to fall, consumers are turning to used cars – putting a big strain on supply and driving up prices.

As a result, the average price of a used car increased by 12.5 percent between last year and this year from $21,020 in February 2020 to $23,643 in February 2021 according to NADA. That bump in price is great news for dealers – if you can find used cars to sell that is!

The market will calm down eventually, but it may take some time. As CNBC reported, chipmakers shifted their focus to electronics like computers when dealerships and OEMs shut down during the pandemic.

Now, those same suppliers are struggling to keep up with renewed demand from the auto industry. Ron Montoya, senior consumer advice editor at Edmunds.com, predicts that car pricing and inventory will likely be affected through at least the second half of 2021.

In the meantime, what’s the best way for dealers to source used vehicles? Finding vehicles is a challenge, and purchasing vehicles at auction is expensive and pits you against your competition and rental car agencies. Your best bet is to get creative in your sourcing. Here are a few ideas:

1. Create a “Cash for Not-So-Clunkers” Program. The 2009 Cash-for-Clunkers program was a success because it got consumers back in showrooms and jump-started new vehicle sales. You can use the same idea to boost used car inventory by encouraging consumers to sell extra vehicles that they are not using. Cash-for-Clunkers offered at least $1,000 for old cars that met eligibility criteria. Why not offer $2,000 for anything that runs? You can also advertise that you’re willing to pay over Kelly Blue Book value for a trade. I know of a dealer offering 120% over book value and consumers are biting. Consider even subsidizing some service work to get the vehicle in working condition. Even if the car requires some tech elbow grease, the premium mark-up on used cars will surely make up expenses incurred to get the vehicle in a sellable state.
2. Scour social media sites. If I was a used car manager, I would avoid the auctions and seek out individual sellers on social media sites. Facebook Marketplace and Craigslist are both good places to start. Approach sellers with an offer 10 to 20 percent over asking price and have a check in hand. In today’s market, you can finance or sell these cars for 70 to 80 percent of their sticker price.  
3. Call fleet companies. You can also circumvent auction houses and go directly to fleet companies. It’s hard to have qualms about a fleet vehicle that was used as a company car and driven normally. The cars generally will have higher mileage than a privately owned version of the same model, but they were likely serviced regularly and kept in decent shape. Fleet companies will gladly work with you directly vs paying a seller’s premium to the auction house.
4. Launch local marketing campaigns. This may be the only time in history when used vehicles are appreciating in value. That’s a powerful marketing message. Run a campaign in your local paper, TV, and on social media sites, that encourages consumers to cash-in during this unprecedented time and upgrade to a new vehicle at a lower interest rate. You may not have a new car on the ground right now, but you will. As part of your messaging, let consumers know they will be at the top of your waiting list and will receive regular updates about when their new vehicle will arrive.

These are some weird times: sky-high profits but only if you can find something to sell. Sourcing inventory means you need to get creative. Avoid paying outrageous prices at auction and instead think outside the box to get the inventory you need and ring up sales during this unprecedented time.

I believe the paperless car deal is the holy grail of automotive retailing. In my last blog, I talked about how e-contracting is the sticking point in reaching this ideal. The reason is two-fold:

First, car deals are complex and sometimes messy. There are a lot of vendors, systems, and individual variables involved in every single deal.

Second, the paper system isn’t broken. There is nothing fundamentally wrong with using paper - the majority of customers today prefer it! Even during the pandemic, the number of customers willing to complete a deal from start to finish digitally was a fraction of all buyers.

However, e-contracting offers a lot of benefits, including faster funding and a speedier process for customers. I think it’s safe to say that as customers progressively get more comfortable with technology and eSign platforms, more will want a paperless process. But not everyone will embrace change.

For example, my 95-year-old grandfather thinks it’s ridiculous that Ford created the Lightening. For him, gas is the only way to go. When it’s only digital one day, there will be a buyer that requires you to accommodate for paper. That being said, paperless is gaining a lot of steam with dealers and customers. There are several reasons why; two of the most compelling are cost and security.

Consider that a 100 deals a month generates approximately 27 boxes of paperwork. With a cost of storage around $2 per square foot, and each box measuring about 1.5 square feet, dealers storing paper documents spend over $900 a year to store a month’s worth of deals. Over the seven years required to retain deals, that cost balloons to over $6,300. For one month of deals!

When it comes to security, deals stuffed in filing cabinets and storage lockers are vulnerable to theft and loss. Deal jackets housed in the cloud by a third-party document management solution are protected by strict access controls, and secure cloud servers with firewalls and cybersecurity tools.

I think we all agree that e-contracting is the future of auto retailing and dealers need to position themselves to incorporate these tools. Still, putting an online system into place can be daunting. To sell in a paperless manner, each piece of the deal needs to work digitally. In order to do that, you need to understand what goes IN a deal jacket.

Breaking down deal jacket silos.

The DMS is going to sell how streamlined their product is and how it will facilitate a consistent process for every deal. That’s rarely true, because the pieces of the deal are siloed between multiple parties. Consider the breakdown of a deal jacket:

• Front-end Sale/CRM documents
• Credit application forms
• F&I desking product documents
• Office and accounting documents, including tax, registration, and incentive forms
• Government required documents including Title and DMV requirements (some states will not accept an electronic signature)

Remember: your customers view your dealership as one company, not a collection of separate companies or organizations. Sure, they may understand their loan, for example, is through a separate financial institution, but they still expect you to be the expert at point of sale. Utilizing numerous products to streamline your operational process has to be perceived by the customer as a single, cohesive process.

Breaking down deal jacket silos is extremely difficult if products do not implement with your DMS. In addition, who is going to manage each software platform and make sure each piece of the deal integrates with all the other pieces? Managing digital systems can become very complicated.

Tips for preparing for e-contracting.

Dealerships across the country have cleared hurdles and put e-contracting in place. A recent article in WardsAuto noted that RouteOne had 20,000 new and used dealers enrolled on its credit-application processing platform last year, including 9,000 participating in its e-contracting service.

I believe the key to success is proper planning for how to implement e-contracting because every sales tool, technology solution, and data point, must be integrated. A great place to start is by evaluating these five questions:

1. Can it be digital? – Many dealerships have a digital contracting solution, they just don’t use the eSign feature. A solution that you already use that has digital capabilities will make it faster and easier to get up and running with e-contracting.
2. Is a digital version allowed by your financial partners and states where you do business? – More states are adopting e-contracting, but there are still hold-outs. The same holds true for lending partners. Do your homework to make sure a digital process is possible before moving forward.
3. Does your OEM currently work with a specific solution that compliments other solutions already in place? –Many OEMs have a preferred partner so investigate how that vendor will work with current solutions, how documents are exported, and how documents are archived.
4. Is the cost feasible? Hidden costs are common, especially when it comes to implementation fees. Also factor in the cost of delegating an employee, or hiring someone new, to manage the implementation and ongoing process.
5. Does your solution integrate on a granular, detailed level? Can you customize pieces of a deal that need to be customized? – Deals get complicated when incentives, special programs, and warranties are added in. The best solutions can handle these types of customizations.

The key here is to identify the hurdles BEFORE you make the commitment. If any of the questions above force you to question the answer, you need to do the research to plan a proper strategy.

E-contracting is the future of automotive retailing – but the complexity of auto deals means there are still hurdles to overcome. Now is the time to do the behind-the-scenes homework and evaluate solutions, your sales processes, and your current technology, to prepare for the online evolution.