Digital Dealer - April 2018 - 17

who have the authority to
appraise vehicles. From
my observations, there's
a fairly wide degree of
variance among the
appraisers, when you
judge their decisions
based on their cost-tomarket ratios.
Cost-to-market measures your cost to acquire
the vehicle against the
prevailing retail asking
prices for the unit, a calculation that yields your
potential profit margin
spread. If you acquire a
vehicle for $8,500, and
the retail asking price is
$10,000, the cost to market is 85 percent.
There's margin to be
gained by managing and
measuring the consistency of your appraisals,
as weighed against your
cost to market targets.
I recognize there are
real-life pressures to allow
a little more for trade-ins.
But I would submit those
pressures will fade as you
use the current market to
establish the fair value of
your acquisitions.

TRIM
RECONDITIONING
COSTS. I'll put aside the

question of how much you
can rightfully charge for
labor and parts for your
internal reconditioning
work. But when's the last
time someone asked your
third-party vendors for a
little haircut, perhaps a
5 percent to 10 percent
reduction? Chances
are, those invoices get
paid without too much

question-an area of
oversight that offers
some margin opportunity.
It's worth remembering
that part of the NADAreported net loss on used
vehicles amounts to
someone else's gain.
MINIMIZE
DISCOUNTING. Just

as some appraisers
seem to acquire cars
for the right money than
others, some sales
associates are better at
avoiding discounts than
others. When you price
your used vehicles to
the market, there's
simply less room for
negotiation, and your
average showroom/
other discounts
should reflect this
reality. The key, of
course, is to manage
and measure your
discounts. Everyone
who puts their initials
on a deal should be
held accountable for
the discounts they
approve-and properly
trained to know how to
maintain your margin.

doubt, that's why top-performing dealers maintain
at least 55 percent of
their inventories under 30
days. Their gross profits
tend to look better than
dealers who carry a larger
share of older vehicles.
As I mentioned, these
recommendations won't
completely eliminate margin compression. But they
can help slow its harmful
effects and help you
avoid profitability leaks
that make the problem
even worse.

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

REDUCE INVENTORY AGE. In today's

margin-compressed
market, retail speed
is the only way to
take advantage of the
age-old truth that fresh
cars deliver the best
gross. Dealers who
sell a larger share of
fresh vehicles would
maximize each unit's
gross profit potential.
It's really a black and
white proposition. No
D I G I TA L D E A L E R . C O M

APRIL 2018

17
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