Between a lack of inventory, increased auction fees and a volatile market, stocking your lot is not for the faint of heart these days. To be successful, you have to move fast.
You need to make decisions quickly at auction. You need to inspect trade-ins and decide on an offer that will benefit you without slowing down the sales process. You need to appraise and price vehicles with the most up-to-date information possible in a market that can change quickly.
But even with tools in place to help you, you’re still relying on your experience and if you miss on a vehicle, it’s tough to recoup the margin. And as front-end grosses continue to come down, a $500 miss means more every day.
So, what are the biggest issues leading to misses on used vehicles?
1. Difficulty Finding True Comp Vehicles
You’re constantly spending time looking at comps to get a vehicle priced right. How long do you have to spend manually sifting through comps because there are outliers that don’t match the vehicle you’re appraising? Do you consistently have to tweak search parameters to find more comparable vehicles when your initial search doesn’t yield enough results?
Not only does this take up time, but even after looking at comps, it’s still very difficult to make an accurate appraisal. Features, mileage, color, drivetrain and so much more play into the value of each vehicle. Are you really 98% to market for that specific car or are you 98% to market within 100 miles for that model? This can make all the difference for your bottom line.
2. Lack of Recon Visibility Up Front
During the appraisal process, you have little insight into the mechanical condition of the vehicle you’re appraising or exact reconditioning costs. Your walk around, test drive and the Carfax report can only give you so much.
Once the inspection happens, it’s amazing how many mechanical issues pop up, not to mention the stored diagnostic codes that were cleared by the customer at AutoZone on the way to trade in the vehicle. These unexpected costs can hurt your profit because you weren’t able to factor them in to the price you paid for the vehicle.
3. Lack of Visibility During Recon
When unexpected costs come up during the reconditioning process, you’re forced to repeat the appraisal process. For example, when you bought the car you planned $1,000 for recon. Three days later, you get a work order for approval for $2,000. To decide whether or not to go through with the repairs, you have to go back through the process of manually checking comps to reprice the vehicle. It’s a pain to determine if that $2,000 is worth it.
On top of that, the time it takes for you to make this decision is time when recon work is paused. Even if you make a decision quickly, your technicians may have moved on to other jobs, unable to quickly continue work on the vehicle. With holding costs for used vehicles at around $40 per day conservatively, these delays can cost you.
As front-end profits tighten, misses on used vehicles hurt more. To tighten up acquisition and pricing, you need a different way of operating.
- You need a single system across departments for a unified view of every vehicle.
- You need a comp set that is true to your market and each vehicle, and that updates automatically.
- You need bi-directional visibility into recon — when buying and approving work.
You need to make decisions quickly and accurately from acquisition to appraisal to pricing. Now is the time to find the tools to support you.
