Digital Dealer - May 2018 - 25

walk away.
In such circumstances,
even if a vehicle's cost-tomarket parameters aren't
as favorable as you'd like,
the opportunity to retail
the unit, and generate
additional gross profit in
service/F&I and potentially secure another trade-in
vehicle, can outweigh the
inherently higher acquisition cost.

2. AVOID THE "PRIDE
TRAP." It's not uncommon

for used vehicle managers and buyers to come
back from an auction,
feeling pretty proud of
what they purchased.
Such is the psychological
nature of the auction-buying format. Your bid is
the winner! But, on the
other hand, your winning
bid might also mean you
simply paid more than
anyone else to acquire
the vehicle.
To test this dynamic,
I'll sometimes compare
the cost-to-market ratios
for essentially identical
vehicles a dealer acquired
via auctions and trade-ins.
The comparison typically
reveals the cost-to-market
disparity noted above-
the cost of the purchased
unit runs about 10%
higher than the trade-in.
I'll note that this finding doesn't necessarily
suggest cause for pride.
Rather, it's a reflection of
the wholesale market's efficiency, and the inherent
advantage trade-in opportunities offer dealers.
3. FOCUS ON FASTER

SALES VELOCITY. Ide-

ally, there shouldn't really
be any difference in the
number of days it takes to
sell purchased or trade-in
units. Time is money for
every used vehicle and,
given the cost-to-market
disparity between purchased and trade-in units,
it's even more important
that you retail auction
vehicles as efficiently and
fast as you can.
But here's the reality
in inventories across
America: Purchased
units typically take longer
to retail, and they often
make up 70 percent to 80
percent of a dealer's aged
vehicles.
You can usually trace
this problem back to the
"pride trap" noted above.
When used vehicle
managers are too proud
of a purchased unit, they'll
set an initial asking price
higher than it should be,
given competing units in
the market and the unit's
initial cost-to-market ratio.
Such decisions make the
vehicle less appealing to
price-smart buyers and
slow its eventual retail
sale.
Top-performing dealers
mitigate this temptation
by striving to maintain at
least 55% of their inventories under 30 days of age.
These dealers will also
strive to keep their daysto-sale average consistent
across their purchased
and trade-in units. Both
types of oversight tend
to drive more market-re-

alistic pricing decisions
that maximize every unit's
front-end gross profit potential and sales velocity.
Dealers who make
these pointers part of their
wholesale acquisition
process tend to complain
less about the high cost of
purchased units. Instead,
they focus on the age-old
principle that "you make
your money when you
acquire a vehicle" and
manage each investment,
regardless of its source, to
preserve and produce the
maximum profit possible.

DALE POLLAK, vAuto's
Founder, has 13 years
of Dealer Leadership
Experience and is a bestselling author and recognized
speaker on maximizing
dealership profits from preowned vehicle operations.
Pollak received his B.S. in
Business Administration
from Indiana University and
is a graduate of the General
Motors Institute of Automotive
Development. He also holds
a law degree from DePaul
University's College of Law,
and is a four-time winner of
the American Jurisprudence
Award. EMAIL: Dpollak@
vauto.com

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

M AY 2 0 1 8

25


http://www.rosenfieldandco.com http://www.rosenfieldandco.com http://www.DIGITALDEALER.COM

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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