Group Trade Best Practices

June 2, 2020

It happens at every dealership. You’ve invested time and money reconditioning a vehicle that seemed perfect for your lot. Thirty days becomes 45, 45 days becomes 60, and, finally, it becomes clear this car has to go.

Do you sell the vehicle at auction and incur transportation costs, auction fees, and possibly wholesale losses? What if your frontline-ready car is purchased by a competitor and sold at a profit?

If your store is part of a dealership group, the best and most profitable solution is to give that aged or unwanted unit another run at a sister store’s lot. By trading within your dealership group — a process known as group trade — you’re able to reduce wholesale loss, save on auction fees, keep core inventory within your group, and drive additional overall group revenue. In this article, we’ll outline best practices for running group trade for operations of all sizes.

Select a Moderator

There are multiple ways to set up group trade. We recommend a model that organizes all your group’s used-car managers and general managers weekly. Having this regular cadence keeps your trade desks at one to two hours. We suggest scheduling them on Mondays at 9 a.m. or 10 a.m., so trading ends before the dealerships get busy.

We recommend you assign a nonbiased individual, such as the group’s used-car director, to manage and moderate the bidding. This person will also need the authority to make decisions, especially when it comes to settling disputes. Think of this individual as your group trade project manager, because you need someone to keep all your managers and GMs on track.

Trade Desk Preparation

Each week, managers must compile a list of vehicles they plan to make available during the trade desk. Every group has its standards, but we recommend sending any unit that’s been on the lot for 45 days or longer.

Vehicles listed should be reconditioned and priced correctly before the trade desk. Cosmetic and mechanical problems are often the reason frontline-ready vehicles go to auction. Requiring that vehicles listed for trade are in good condition also helps instill trust. We’ve seen it happen before: A vehicle traded to a sister store requires reconditioning that wasn’t disclosed. The point here is you need to set ground rules to which all participants are held accountable.

As for pricing, vehicles should be priced to current market conditions. That means vehicles that haven’t received a recent price update shouldn’t be offered for trade.

Also make sure vehicles listed for trade have clear, detailed interior and exterior photos, as well as full book-out information. Remember, transparency is key. Like customers, your fellow manager at a sister store won’t purchase a car without photos, as vehicle images often help identify problems or explain why a vehicle didn’t sell.

Knowing that aged vehicles will be offered to sister stores encourages used-car managers to be more vigilant during trade walks, and when monitoring and adjusting retail prices to market fluctuations, and making sure vehicles have been booked out accurately.

Make sure your moderator diligently manages the trade desk timeline. By Saturday night, all vehicle lists should be submitted to the moderator. By Sunday, have your moderator compile all vehicles available in trade desk. Managers can look at the list Sunday and prepare to bid by Monday’s call.

Key Strategies

Used-car folks love to bargain. That’s why they’re in the business. Help managers understand they will get great vehicles if they give great vehicles — i.e., “You give me a break on this car, and I’ll give you a break on that car.” That’s a win-win for the group. Encourage managers to collaborate and cut deals, but make sure every deal goes through the group trade desk.

The following are other trade desk strategies you can implement:

  • To keep all managers engaged until the sale ends, sell vehicles based on age, not by store. That disburses each dealership’s vehicles throughout the sale, making it easier to keep managers engaged as they wait to bid on or sell a vehicle.
  • Make faster decisions about a vehicle’s fate; they don’t get better with age.
  • Used-car managers should be prepared to talk up their vehicles — via conference call — when they are featured.
  • The bidding should be done in increments of $250 and limited to one minute per vehicle.
  • Keep things moving and discourage managers from getting attached to off-brand vehicles. That’s especially important if the vehicle is valued at $10,000 or more, or a sister store of the same franchise brand can sell it as a certified or noncertified pre-owned vehicle.
  • A vehicle should only be traded once within the group. A vehicle that sits 60 days at one dealership and another 60 days at a sister store needs to go.
  • Urge managers to be proactive and search for group trade desk opportunities. For example, take notice whenever a sister store appraises a trade. DealerSocket’s Inventory+ software has a feature called Group Trade, which will notify you by email or text whenever a store within the group takes in a trade. If that vehicle fits your core inventory profile, monitor it. If it hits the 45-day mark, let the store’s used-car manager know you’d like to have it. Conversely, if you have a car that isn’t right for your store, contact a sister store’s used-car manager to see if he or she is interested.
  • Group Trade enables dealerships to run weekly reports that show data such as the trade desk’s closing ratio, pending appraisals, preliminary photos taken, book outs, and percentage of core vehicles in inventory. It can also track the age of units in inventory.

Above the obvious benefits, group trade promotes camaraderie among colleagues who work for the same company but may not know one another. Our team has seen group trade foster brainstorming, collaboration, and increased morale, and decreased turnover.