You’re Losing $700 on Every Trade - Why the Data Screams, 'Mandate 100% Scans!'

You’re Losing $700 on Every Trade – Why the Data Screams, ‘Mandate 100% Scans!’

Having the right appraisal data integrated with accurate reconditioning costs in hand before the deal is transacted leads to acquiring inventory that can be turned at a profit.

Sixty percent of the trades you’ll make this month will at once put you $725 further under the margin compression siege that is out to plunder your profitability. As sad as this loss is to your dealership, what is even more tragic is that feedback loop data is available to help you control this loss — and it is screaming, “Mandate 100% scans on every purchase or trade!”

VinTel studied 2,251 vehicles scanned across 10 selected dealership rooftops and found that 59.82% had VinTel-indicated exceptions, resulting in an average of $724.45 in reconditioning mechanical parts and labor costs, and the scan takes less than 60 seconds. New VIN-scan tools that integrate with reconditioning software can provide deep, rich mechanical systems data and accurate reconditioning parts and labor costs for the vehicle make, model and year.

This is critical information to have in hand when used by any dealer — and especially by public groups — seeking to bolster earnings per share. To do this, they must become more efficient and profitable at the individual and group levels. A promising sign is that groups are installing group-level variable and fixed operations directors accountable for delivering predictable operational efficiencies and using enterprise-level reconditioning and appraisal reporting to drive more profit from parts, service and used car sales.

Unfortunately, data to close the appraisal gap and retain more profit has not been readily available. Dealers we recently polled via LinkedIn cited the availability of this data for appraisal skills training as a significant need for their dealerships. We asked what frustrates dealer GMs most about their trade appraisal process. Fifty-one percent of respondents cited poor estimating skills, and 29% cited a lack of data for training.

Nathan Mirza, a former dealership GM and founder of 180Dealer, said: “If you want to know if your team is consistent, have them all appraise the same vehicle and then sit in your office because you’ll probably go into convulsions when you see how starkly different each appraisal is. You won’t be happy with what you see, but you might decide to do something about it.”

Matt Hubiak, director of preowned operations for the Swickard Auto Group, had a similar issue. “Nobody’s circling back with the sales manager, the used car manager or the appraiser, and asking, ‘Why aren’t we accurately appraising the car? Why aren’t we using the data to close the gap?’

“For that to happen,” he continued, “we need a feedback loop. Normally, no one looks at the numbers of these transactions, and we lose that education and training value from the appraisal. Whether we’re good at appraising or bad, none of it matters until we can find out where we are so we can improve.”

The upfront appraisal is such a margin beater we recommend dealers change their road to sale, so the vehicle appraisal step immediately follows the customer meet and greet. Here’s why:

1. It builds trust and reduces anxiety with trade customers.

2. It creates transparency to neutralize trade concerns and fosters a relaxed transaction.

3. It improves reconditioning time-to-line speeds.

4. It ensures against unexpected chargeback repairs.

Having the right appraisal data integrated with accurate reconditioning costs in hand before the deal is transacted leads to acquiring inventory that can be turned at a profit. This results when you use predictable performance results that align all users to your reconditioning time-to-line and average days in recon metrics. The latest book on the subject, “Aspire to Predictable,” outlines this practice.

Consider using margin compression reasoning to explain to your people that deals will not get approved unless there is a diagnostic scan on the trade. Explain that insisting on consistency here offsets margin compression and helps keep those dollars in their pockets and stops the reset-the-trouble-code game, and that 100% OBD2 appraisal scans eliminate hidden mechanical conditions.

A scan tool that pulls repair parts and labor detail from recon data transforms “average” recon reporting into accurate cost reporting. Not only does an appraisal-first process like the one I’m describing reduce or eliminate the cost of sales erosion, but time-to-line recon by helping get cars from acquisition to frontline sooner also helps control holding costs and, thus, margin compression. If you’re not using an enriched OBD2 scanner integrated with accurate reconditioning labor and parts costs on every vehicle, every time, the enemy is at your gate.

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