Would You Pay More Than Book Value?
This might sound crazy, but wouldn’t you pay over “book value” for a car if you knew it was going to retail in under 60 days? If your answer is yes, you would be shocked by the number of dealers out there that would pass even though they know it would sell.
Dealers are so beholden to book values that they would miss the opportunity to retail a vehicle to a consumer even the before the consumer decided they wanted it.
New Tools for a New Customer
They automotive industry is still so reliant on book values, they are missing the opportunity to increase sales by focusing only on acquiring popular vehicles under their chosen book value. Dealers must understand that consumers are going to purchase a car based on what they want, not based on what its worth. Most consumers don’t understand what percentage of book or market values are, they only care about the dealership that has the car they want.
Your Experience and Your Data Can Work Together
So how do you stop relying on book values when it comes to purchasing inventory, whether at auction or via trade?
First, you need to understand what type of dealership you are and what your team is good at selling. The data is available to understand more about your dealership than you can expect. Does your team do better with trucks compared to cars, or do you handle sub-prime customers well or are they bogging down your F/I department. Understanding your stores strengths and weakness will allow to put together the beginning of a strengths based vehicle acquisition strategy.
Second, use market data to understand what type of inventory sells faster in your market. Amazingly most dealers buy inventory based on what they like, not what their market wants. The data that is available today will help you understand what year and trim level Honda Civic sells fastest within your market.
Third, have a plan when its time to acquire inventory. Know which vehicles you are going to buy. Understand that you might pay a little more than you want, but if someone comes in to buy quickly, does it really matter what you paid for it? Remember, consumers don’t care what you own the vehicle for, they only care what you are willing to sell it for. Vehicles are a commodity, an investment you make that needs to flipped quickly for a return.
Success Requires Change
We have worked with several dealerships to help execute the strategy outlined above. The success stories are plentiful that we would be happy to share.
I’ve been selected to present the Used Car Strategy session at Driving Sales President’s Club on April 9-10th in NYC. DSPC is designed for Owners, Dealer Principals and General Managers who want to take their strategy to the next level. I’ll be sharing how one of our dealers in a challenging market used the data to leverage a huge comeback. (If you’d like more information on Driving Sales President’s Club click the hyperlinked text. For a $200 discount enter TOBIASVIP when you register.)
Two Simple Words
In one of my favorite movies, Moneyball, Billy Beane, GM of the Oakland A’s must manage some drastic changes to his team roster and budget and still find a way to be competitive. In addition to the front office pressure, Beane got push back from his longtime scouts and one made it personal, resulting in the loss of his job. In an attempt to reason with the scout, Billy tries to bottom line it for the scout with one of my favorite quotes in the movie; “Adapt or die.”
Its time for your dealership strategy to adapt to the consumer driven market, and we are here to help.
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- Beholden to Book Values-PART 3 - March 30, 2017