Why You Need Rapid Reconditioning - AutoSuccessOnline

Why You Need Rapid Reconditioning

At its core, the process of reconditioning trade-in and auction vehicles is a ‘time-equals-profit’ business. Intuitively, used car managers understand this.

Not to be simplistic, but you already know the answer to the question, “Why do I need rapid reconditioning?” You need it because time is money.

If you can’t measure recon speed and maintain process accountability accurately, any cycle time your team offers is just a wild guess. In our experience, most such “estimates” are 10 to 15 days off from reality.

Strive for a three-day average in recon (ADR). For some shops, a consistent seven-day ADR is appropriate, because some events that influence recon speed are beyond the control of the recon department.

Every day a car is in process in recon — from onboarding from trades or auctions until that car hits the sales line — piles on holding cost depreciation. NCM Associates puts this daily erosion per vehicle at $36, a vehicle’s daily share of various overhead expenses. This burden comes right off the “sold” gross. A vehicle in recon 10 days eats $360 in gross. Multiply this across the number of units you recondition in a month and holding cost depreciation becomes a gut punch.

A used car’s magic bullet for sales is the first 30 days you own it. Spend half of those days getting the car to the front line and that sluggishness leaves just 15 days to sell at maximum gross. Profit opportunity slides downhill after that.

Faster recon puts more cars on the lot to sell without having to stock extra units, improving turn. Shave 2.5 days off recon time and turn increases one time.

Rapid reconditioning can also eliminate finger pointing. Without a way to hold individuals accountable so everyone gets their work done correctly and in the timeframe they should, tensions mount and confusion reigns in the used car, service and recon departments.

Here’s how to transform recon to rapid reconditioning:

Remove delays so you get cars to the sales line faster. Pursue process structure, accountability, measurement and automation to achieve rapid reconditioning.

Eliminate repair estimate approvals by the used car manager for most vehicles. From DMS records, learn average recon charges for different makes/models, years and mileages, and then get the used car manager’s one-time OK to recon vehicles within these various cost buckets. This change alone can shave hours, sometimes even days, off recon time.

Equip staff with mobile tracking software so no one forgets units parked on the back lot or left at sublets. When everyone knows precisely where every car to be reconditioned is in the workflow — and who is responsible for each step — individuals work more diligently and productivity increases all around.

At its core, the process of reconditioning trade-in and auction vehicles is a “time-equals-profit” business. Intuitively, used car managers understand this. Those who operate more profitable used car operations insist their recon managers manage to the hour and the penny.

Consider these examples:

Fred Martin Superstore, Barberton, Ohio:

“We were certain cars were frontline ready in five days, but, in fact, we were taking eight to nine days,” said GM Tom Dunn. “Everyone here who works with used cars knows the faster they get to the lot the better chance we have of selling them at the highest gross profit. We could hire more employees to push more cars through recon faster, but we accomplish so much more by practicing rapid reconditioning principles.”

Ricart Automotive, Columbus, Ohio:

“We thought we had good insight into how long it was taking us to get vehicles frontline ready but, when we started using rapid reconditioning practices, we learned we were at 12 days! That long cycle was killing gross,” said Jared Ricart, service operations manager. “By understanding how holding costs erode gross, a parts manager, for example, can better decide whether to buy a more-expensive part to do the repair now to keep that car moving forward through recon versus a less-expensive part that takes a day or two to arrive. Now, we track every step of our recon process and have reduced that cycle to four days.”

Morrie’s Chippewa Valley Mazda, Chippewa Valley, Wisconsin:

“We used to handle recon in the retail shop, but used cars’ appetite created scheduling and resource challenges. It took 10 to 14 days to get cars to the lot!” said Ryan Riste, service and parts director. “Now, by using rapid reconditioning software, our time is 5.5 days on a monthly volume of 220 vehicles. We have an aggressive pricing structure, so that means if a car takes 15 days to get through reconditioning we are losing
money on that car. This focus on average days in recon helps us maintain higher gross.”

Kelley Automotive Group, Ft. Wayne, Indiana:

Trent Waybright, vice president of pre-owned operations, used to wonder, “How much money do we lose by not getting cars through recon to the sales line faster to take advantage of the 30-day optimal retail window?” His analysis showed a three-day-faster cycle time would mean an additional $291,951 in monthly sales gross for Kelley Automotive. “By replacing finger pointing with mobile notifications and the ability to confirm a process step is completed, rapid reconditioning software takes error and friction out of the process. The mobile app makes recon like playing hot potato — nobody wants to be responsible for holding up the process. We’re certainly seeing how it increases turn and improves grosses for Kelley Automotive.”

“Why do I need rapid reconditioning?” You already know: Because time is money.

Dennis McGinn

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