Fixed Ops Journal - October 2017 - 35

FIXED OPS JOURNAL

RECON

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leased --- was 62 percent, according to Kelley Blue Book. The lease rate
for all vehicles was 31 percent, KBB says.
Dealers and fixed operations managers likely will face a growing supply of off-lease cars and trucks that need reconditioning. Motorwerks
BMW in Bloomington, Minn., is ready. In 2014, anticipating growth in
off-lease vehicle volume, the dealership converted a leased warehouse
across the street to a reconditioning center.
The five-lift facility does all cosmetic reconditioning work --- such as
removing dents, repairing alloy wheels and painting --- says Matt Mickelson, the dealership's general manager. The center also does mechanical reconditioning for non-BMW vehicles; the service department in
the main dealership, which has 37 lifts, continues to handle that work
for used BMW cars and trucks.
Motorwerks BMW, part of Penske Automotive Group, uses software
sold by vendor Rapid Recon to identify any inefficiencies in the reconditioning process. Dennis McGuinn, Rapid Recon's founder and CEO,
says his firm works with nearly 1,000 new-vehicle dealerships, including Penske and Galpin Motors stores.
Rapid Recon tailors reconditioning software to a dealership, then
spends three months at the store helping to put it into practice. The initial fee is $1,500 for a typical dealership that reconditions 100 or more
cars a month, McGuinn says. After that, the dealership pays a monthly
subscription fee that averages $600.
Following a stringent reconditioning process is crucial for off-lease
vehicles because many of them will be sold as certified pre-owned,
meaning they carry a factory warranty, McGuinn notes.
"The manufacturers are brutal if they see any problems," he says.

Auction aid
Dealerships that lack sufficient reconditioning resources on site can
tap Retail Advantage, launched in 2015 by the auction giant Manheim.
The program, installed at 12 of Manheim's 81 U.S. auction sites, enables a dealership to tell Manheim which used vehicles it wants. The
auction company finds them, acquires them, reconditions them, and
ships them to the store.
Manheim Retail Advantage's business has doubled since last year,
says Austin Ledgerwood, the program's director of business development. Its customer base among new-vehicle dealerships also is growing, he says. Ledgerwood did not provide specific figures.
"We are seeing large increases because of the volume coming off
lease," he says.
Manheim Retail Advantage reconditions certified used vehicles for a few
dealer customers, Ledgerwood says. But BMW Motorwerks' Mickelson
says that for dealerships with adequate reconditioning capacity, keeping
such work in house is preferable because the margins are so strong.
"Why would I give [a third party] the profit?" Mickelson says.
Mercedes-Benz of Arcadia, part of the 15-dealership Rusnak Auto
Group in the Los Angeles area, certifies nearly every used Mercedes
vehicle it sells, Ziemann says.
His dealership would love to get more off-lease vehicles, Ziemann
says. It has room to expand its service department to provide more
space for reconditioning, he adds.
"We won't have a problem," Ziemann says. "There are [other] dealerships that are just maxed out." 

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OCTOBER 2017

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