The process of reconditioning used vehicles is a costly, but necessary, undertaking for dealerships. Thanks to new technology, there are now tools and systems available to help dealerships get the best value for their recon dollar. A new tool that is trending with dealership vehicle reconditioning is the Master Vendor Program (MVP) concept. This program focuses on centralizing vendors (i.e. wheel scrapes, dents, touch-up, interior repair, etc.) into a single reconditioning operation under the direction of a master vendor.
MVPs provide single-source accountability, fixed-unit pricing, reduced cycle times, streamlined accounting processes and increased profit potential through the service and F&I departments. The most important benefit received, however, is to upper management. By implementing an MVP, control of the processes return to the dealership. With an MVP, dealership management knows the exact vendor recon cost on every vehicle when they take delivery — not after. Vendor services are performed daily — not when your vendor “guy” shows up. All vendor services are tracked through a software program so you know when each service is being performed and by whom. Cycle time is recorded for every vehicle. Streamlining of accounting functions is achieved when only one vendor sends one statement.
If your dealership is not seeing the results it expects from its reconditioning program, it may be time to make changes. But what is the best choice for your dealership? If you consider implementing an MVP, how will it benefit your dealership?
MVPs provide centralized vendors and single-source accountability. No longer will a good vendor be gone once his manager leaves and takes the vendor with him, nor will poor work be accepted because the vendor has a relationship with an individual manager. The master vendor is responsible for providing technicians who are fully trained and performing services in a professional manner. A good MVP will afford management the flexibility to make changes in individual technicians or vendors as required. This prevents the dealership from having to accept poor quality from a technician because “he comes with the program.” Since all vendors work under one master vendor, there is only one person to call if there are issues. A national company can often be a great support system as well, and typically offers a warranty on work.
Total reconditioning dollars may increase when implementing an MVP, but costs savings will be seen in other areas, such as cycle time and employees.
With the establishment of a set level of reconditioning, the resulting product will be consistency. Every vehicle kept for resale will be reconditioned to a predetermined standard, regardless of condition, before it is seen by the customer. The range of required services between vehicles needing fewer repairs and the higher costs on those requiring multiple repairs in a number of services will set the standard price per vehicle. The key is to establish a fixed price per vehicle and the established level of reconditioning that the dealership requires. Beware of a provider offering a lower fixed unit price and then subsequently cutting corners on repairs to compensate. A minimum volume is often required to maintain the levels needed to have all technicians available on a daily basis.
Are there ways to create more profit with the program you are considering? How much more income could be generated through your service drive and F&I departments? Your Master Vendor Program could help.
A good MVP will also provide a fixed pricing schedule for retail service drive repairs. With a fast and convenient option to repair small damage identified during the service drive inspection, your dealership will finally be able to capture this additional revenue while allowing your customers to feel great about the car that they fell in love with, providing a great opportunity to bring added value to your customers.
For the F&I department, this new capacity can be translated into an opportunity to prepay for these appearance services through a protection program. Another opportunity to offer what your customer is looking for — peace of mind when it comes to the inevitable small damage to their brand-new purchase. With standard prices determined by the MVP, your dealership can set pricing for service drive repairs at the optimal level for profitability and customer satisfaction. Another benefit of an MVP is reduced cycle time. (If your MVP doesn’t reduce cycle time, you have the wrong master vendor.) With technicians onsite daily, vehicles can be reconditioned as soon as they are cleared through mechanical.
A function that often goes unnoticed with reconditioning is the workload that the traditional process places on the accounting department. When five or six different recon vendors are used, a tremendous amount of paperwork can be generated. This paperwork has to be matched with POs, ROs, management authorizations, etc. Countless hours can be saved by converting to a paperless billing system as well as reducing the vendors to be paid to one. A well-planned and operating MVP will drastically reduce time processing recon invoices by converting to a simple fixed price per car.
With used inventories and lease turn-ins at an all-time high and forecasted to go higher, determining the right reconditioning program for your dealership can be a challenge. Whether keeping all reconditioning services in-house, using outside preferred vendors or implementing a Master Vendor Program, one thing is for sure — dealerships will meet the challenge.