You know that used car that has been sitting on your lot for 30 days without drawing much attention? You’ve got a decision to make… Do you drop the price now? Do you try to hold gross? What are you going to do?
According to Jeff Landwehr, DealerSocket’s National Director of Customer Success, these decisions indicate whether you have a solid aging process or a basic aging policy.
“I’ll ask a dealer what their aging process is, and they’ll tell me they have a 60- or 90-day hard turn policy,” Jeff said. “The problem is that’s actually not a process, it’s a policy. A process is what you do during those 60-90 days to make that vehicle as attractive and profitable as possible.”
Below are key elements of a well-informed aging process.
Get to Market Fast
A good aging strategy begins the moment a vehicle is acquired. If it takes a week or two before your trade hits the lot, you have a problem. Dealerships should have a process to make sure merchandising, pricing, and photographing is completed within days, not weeks.
“If I trade for a vehicle on Saturday, that car should be on my lot by Wednesday at the latest,” said Sr. Customer Success Manager Erik Post. “And that’s if my dealership is closed on Sunday!”
Don’t Race to the Bottom
With margin compression brought on by the availability of competitive information, many dealers believe winning on price means pricing under the competition. But it doesn’t have to be that way.
“If I get a commodity car at the auction, I might blow that out and give my finance department a swing,” said Post. “But if I’ve made a good trade, there is no reason to race to the bottom in pricing that car. That’s an opportunity to set a higher price and hold gross.”
Your First Loss is Your Best Loss
There is a time to hold gross and a time to cut bait. Jeff Landwehr sums this up for dealers with one simple piece of advice: your first loss is your best loss.
“You own a casino, and every spot on that lot holds a slot machine,” he explains. “If I have zero history on a car, I have no problem booting it at 45 days, even if I technically have a 60-day turn policy. Why would I hold on to a slot machine that’s losing me money?”
To hear Jeff and Erik discuss more elements of a great aging process and pricing strategy to maximize profits on used car sales, listen to the DealerSocket podcast.
To hear the entire conversation, check out the DealerSocket podcast.