Digital Dealer - June 2018 - 21

...FOR TODAY'S DEALERS AND MARGINCOMPRESSED MARKET, A 1:1 RATIO SUGGESTS
YOU'RE DOING A GOOD JOB, AND A 1:25:1 (OR
BETTER) RATIO INDICATES A GREAT JOB."
department.
But these higher levels
of performance appear
elusive. National Automobile Dealers Association
(NADA) data shows that
while the used-to-newvehicle ratio has nudged
forward in recent years,
it seems to stubbornly
hover around .75:1.
For the past 10-plus
years, I've been blessed
with the opportunity to
help dealers improve their
used vehicle performance,
in part by encouraging
them to make the 1:1 ratio
a primary objective. My
work has also allowed me
to see and understand
why some dealers struggle to make the wheel of
fortune spin faster at their
stores.
Here are three common
factors that diminish used
vehicle performance:

1: A FRONT-END VS.
"TOTAL GROSS" MENTALITY. I've long made

the case that today's
market is too efficient and
transparent for dealers to
get the front-end gross
profits they believe their
used vehicles should
deliver. They get frustrated, and they double down
on the "let's get gross"
strategy. Unfortunately, today's market isn't
likely to reward traditional
gross-building tactics like

waiting for the right buyer
or setting your asking prices above the market. Both
tactics result in older-age
units, deeper "get 'em out
of here" spiffs, discounts,
and less overall profitability. These tactics also slow
the wheel of fortune.
The better way, I
believe, is for dealers
to adopt a more invest-

er desires for differentiation and specialization.
But top-performing used
vehicle retailers have long
ago shed their preferences in favor of market and
financial particulars that
affirm they can quickly
retail a vehicle and make
money if they acquire it.
A related point: I understand some dealers

DEALERS NEED
TO PLAY BALL WITH
THE FACTORY, BUT
LET'S REMEMBER: IT'S
YOUR BALL AND YOUR
PLAYING FIELD."
ment-minded, total gross
mentality. With it, dealers
learn to take losses and
low-gross deals in stride.
Their average front-end
gross is important, but it's
even more important that
they turn used vehicle
inventory to generate
consistently higher returns
across every dealership
department.

face factory pressure to
meet certified pre-owned
volume targets, which can
tie up capital and management attention that
might be better deployed
on different inventory. To
be sure, dealers need to
play ball with the factory,
but let's remember: It's
your ball and your playing
field.

Some dealers are pretty
picky about the used vehicles they'll retail. They'll
pass on units their market
wants in favor of those
they prefer to sell. To
some degree, this thinking
makes sense, given deal-

used vehicle department
has a lot of moving parts
and processes, each
of which affects the
other. Whenever I hear
a dealer share his/her
struggle to improve their
inventory sales velocity

2: TOO-PICKY VEHICLE PREFERENCES.

3: PROCESS
INEFFICIENCIES. Every

and turn, we'll often
uncover unnecessary
inefficiencies with
appraisals, reconditioning,
merchandising and
pricing. Dealers must
recognize that in today's
more efficient market,
time to market and time
on market, must be
compressed to maximize
performance and
profitability.
I hope this discussion
helps you assess where
your current used-to-newvehicle ratio stands, as
well as how to craft your
next steps to improve your
used vehicle performance
through the remaining
months of this year. After
all, in today's unforgiving
market, if you're not getting better, you're getting
worse.
DALE POLLAK, vAuto's
Founder, has 13 years of
dealer leadership experience
and is a best-selling author
and recognized speaker
on maximizing dealership
profits from pre-owned
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

JUNE 2018

21
http://www.DIGITALDEALER.COM
Table of Contents for the Digital Edition of Digital Dealer - June 2018
