The surest path to better used car profits is to increase inventory turn. The fastest way to add turn is to get cars through recon faster. Get cars through recon just 2.5 days faster adds one turn; shave 5 days and the dealer adds two turns.

More turns increases used car department gross. What GM doesn’t want to report that news to the dealer principal?

It’s theorized that by turning vehicles quickly, the fresh inventory catches customer interest within a 21-day window. NCM Associates says the market shifts about every 21 days. This shift will be unique to the region and even the dealer.  This window is when the dealer’s cost per vehicle per day (see holding cost discussed later in this article) is still low on that vehicle, and the customer’s buying excitement is high.

A GM who doesn’t understand these dynamics may not be the right GM for the dealership.

This concept of market change is consistent, and it changes within this 21-day timeframe. For example, in Utah, where our process performance manager Anthony Greenhalgh is based, the market shifts in August to selling economy and rental cars, for the back-to-school crowd. In late fall, hunting season drives “truck month,” and the Christmas holidays are for selling AWD luxury brands. Spring ushers back demand for large SUV’s and crossovers.

Miss the boat on getting a vehicle to the front line at exactly the right time can mean sitting on an out-of-season $50,000 truck instead of presenting an in-season $50,000 BMW X5!

Work the numbers
Time-to-market describes reconditioning’s influence on inventory turn; it’s a way of timing the market.

It’s tragically difficult to leverage this 21-day market shift when reconditoning time-to-market takes eight to 15 days or more, from vehicle intake to the sales lot!

My point being, vehicle investments are as perishable as leafy greens.

Here’s why achieving a fast three-to-five-day time-to-market cycle is critical to used car gross:

A typical eight-to-15-day recon cycle  erodes so much of prime market opportunity. Faster recon that shaves even 2.5 days off this cycle adds one inventory turn. Where turn is high,  a dealer can avoid having to discount the vehicle to convince the consumer that even though they don’t need a truck right now, the price is good enough to pick one up anyway.

Managing turn is part of the achieving greater used car profitability. So is controlling holding cost depreciation. Holding cost is a $50 per day per vehicle overhead cost (recently increased from $32, per NCM) assigned to each vehicle, from acquisition to the front line (it actually extends to the day the car is sold, but I am talking here about recon holding cost). A 10-day recon cycle equals $500 per car holding cost; reduce recon to five days and holding cost depreciation is halved. Whatever this cost, it erodes actual sale gross by that much.

Use this e-calculator to determine your Holding Cost depreciation: http://rapidrecon.com/holding-cost/

A GM who doesn’t understand these dynamics may not be the right GM for the dealership.

Use the key
Reconditioning workflow software that automates recon processes will help a GM put these keys to work and generate better used car profits as a result. Noted Automotive News about this software: “New digital systems are helping service departments to reduce the time and cost of preparing used vehicles for sale. The key is breaking down the recon process into its separate steps, and analyzing them for bottlenecks.”

The following steps should provide a start on how to build a recon culture:

• Benchmark your start: Put a stopwatch to current recon to benchmark current time-to-market. Start at vehicle intake and stop the clock once vehicles hit the sales lot. Do you know where “lost” vehicles are, on the lot or at sublets? Who’s pulling vehicles out of line, and why – and where are they now in their recon process?
• Get efficient: Operate recon as its own profit center, even if physical recon processes are still done within existing retail service facilities. Eliminate waste efforts, practices, and people. Manage by Make sure personnel understand the dollar value of time, to their pocket and the dealership. Hold them accountable for meeting faster recon objectives.
• Leverage technology: If you’re tracking workflow on a spreadsheet or whiteboard, how thorough, accucate and useable are these tools? Don’t tolerate this looseness anymore. Investigate reconditioning time-to-market software tools to bring organization, structure, and efficiency to this critical function. Talk to peers already enjoying these benefits.
• Share the opportunity: Foster a time-to-market culture. Recon involves appraisers, buyers, service, parts, sublets, the used car department and the recon staff. When everyone knows their contribution to more profitable used car operations and is managed to achieve that goal – individually and as a team – recon runs more smoothly, efficiently, and productively.

The fastest and surest way to improve used car inventory turn is to get used cars from acquisition to the sales line in fewer days. Less holding cost erosion and more turns positions a dealership to be more competitive in its ever-changing market.