Digital Dealer - May 2018 - 24

PreOwned

By DALE POLLAK
Founder,
vAuto

Three Pointers
to Maximize
Purchased Unit
Profitability
I've heard more
complaints lately from
dealers that it seems
impossible to acquire
wholesale inventory and
make the front-end gross
profit they expect.
Indeed, if you compare
the typical cost-to-market
metrics for purchased and

24

M AY 2 0 1 8

trade-in units, you can
see why some dealers are
complaining.
The typical cost-to-market range for auction-purchased units tends to
run between 85 percent
and 90 percent (a ratio
that includes the cost to
acquire the vehicle, buy/

D I G I TA L D E A L E R . C O M

transportation fees and
reconditioning estimates).
Meanwhile, dealers
who acquire a higher
percentage of trade-in
units (based on their
look-to-book ratios) tend
to bring in these vehicles
at a cost-to-market range
between 80 percent and

85 percent, or even less.
This cost-to-market disparity between purchased
and trade-in units can
mean as much, and sometimes more, than a 10%
difference in the potential
margin, or spread, between the cost to acquire
the units and their prevailing retail asking prices.
When dealers ask me
for advice on how best to
deal with this disparity, I'll
share three pointers:
1. RECOGNIZE THE
REALITY. The cost-

to-market differences
shouldn't surprise anyone.
Since the dawn of the
used vehicle business,
dealers are more likely to
acquire the most cost- and
profit-favorable inventory
at the curb, rather than
the auction. But auction
vehicles are a necessity
for most dealers if they
want to maintain their retail
sales volumes. You can't
sell the cars if you don't
have them, and it's unlikely
that most dealers will be
able to acquire all the
inventory they need from
trade-ins.
Once dealers recognize
this reality, they are better
able to understand that
it's imperative to efficiently
find the most profit-favorable vehicles at auction,
and apply an appropriate
amount of cost discipline to acquire the most
profit-favorable units. The
dealers also know that,
sometimes, it makes more
sense to simply acquire
the vehicle, rather than


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Table of Contents for the Digital Edition of Digital Dealer - May 2018

Digital Dealer - May 2018
Contents
Letter from the Show Director
Stop Waiting, Start Changing
Technology Does Not Replace Your People!
Key Buy/Sell Trends for 2018
What’s Tomorrow?
Save Today…Gone Tomorrow
Three Pointers to Maximize Purchased Unit Profitability
Your Best Advertising Target!
NADA Recap BY ARNOLD TIJERIN
Digital Dealer 24 Conference & Expo Recap
Put a Ring on It
“Voicemail:” Untapped Opportunity
10 Questions to Ask When Hiring a Social Media Manager
Omni-what? Your Dealership and the Emergence of the Omnichannel Approach
Digital Dealer - May 2018 - CT1
Digital Dealer - May 2018 - CT2
Digital Dealer - May 2018 - Digital Dealer - May 2018
Digital Dealer - May 2018 - Cover2
Digital Dealer - May 2018 - 1
Digital Dealer - May 2018 - Contents
Digital Dealer - May 2018 - 3
Digital Dealer - May 2018 - Letter from the Show Director
Digital Dealer - May 2018 - 5
Digital Dealer - May 2018 - 6
Digital Dealer - May 2018 - 7
Digital Dealer - May 2018 - Stop Waiting, Start Changing
Digital Dealer - May 2018 - 9
Digital Dealer - May 2018 - Technology Does Not Replace Your People!
Digital Dealer - May 2018 - 11
Digital Dealer - May 2018 - 12
Digital Dealer - May 2018 - 13
Digital Dealer - May 2018 - Key Buy/Sell Trends for 2018
Digital Dealer - May 2018 - 15
Digital Dealer - May 2018 - 16
Digital Dealer - May 2018 - 17
Digital Dealer - May 2018 - 18
Digital Dealer - May 2018 - 19
Digital Dealer - May 2018 - What’s Tomorrow?
Digital Dealer - May 2018 - 21
Digital Dealer - May 2018 - Save Today…Gone Tomorrow
Digital Dealer - May 2018 - 23
Digital Dealer - May 2018 - Three Pointers to Maximize Purchased Unit Profitability
Digital Dealer - May 2018 - 25
Digital Dealer - May 2018 - Your Best Advertising Target!
Digital Dealer - May 2018 - 27
Digital Dealer - May 2018 - 28
Digital Dealer - May 2018 - 29
Digital Dealer - May 2018 - 30
Digital Dealer - May 2018 - 31
Digital Dealer - May 2018 - 32
Digital Dealer - May 2018 - 33
Digital Dealer - May 2018 - NADA Recap BY ARNOLD TIJERIN
Digital Dealer - May 2018 - 35
Digital Dealer - May 2018 - Digital Dealer 24 Conference & Expo Recap
Digital Dealer - May 2018 - 37
Digital Dealer - May 2018 - 38
Digital Dealer - May 2018 - 39
Digital Dealer - May 2018 - Put a Ring on It
Digital Dealer - May 2018 - 41
Digital Dealer - May 2018 - “Voicemail:” Untapped Opportunity
Digital Dealer - May 2018 - 43
Digital Dealer - May 2018 - 10 Questions to Ask When Hiring a Social Media Manager
Digital Dealer - May 2018 - 45
Digital Dealer - May 2018 - Omni-what? Your Dealership and the Emergence of the Omnichannel Approach
Digital Dealer - May 2018 - 47
Digital Dealer - May 2018 - 48
Digital Dealer - May 2018 - Cover3
Digital Dealer - May 2018 - Cover4
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