The used car division of any automobile dealership has a substantial profit stream. All departments selling used cars are always engaged in efforts to increase their customer satisfaction score, inventory turn, and operating margins. At the same time, they are also deeply focused on ways to reduce their cycle time, expenses, and depreciation cost.
The expenses associated with depreciation and reconditioning are two of the most significant expenses incurred in a used car department. In every dealership, there is a constant risk of depreciation with regards to their inventory of used cars. This risk of depreciation increases with the duration for which a used car remains in the dealership. Therefore, it is of prime importance for the dealership managers to reduce the dealership’s used car ownership period. In order to accomplish this objective, they need to reduce the time spent on the used car reconditioning and the time available to make a sale. The situation gets even more complicated because, while increasing the speed of the reconditioning process, the dealerships cannot afford to compromise in terms of their quality standards.
Simple Recon is a simple and cost-effective alternative that allows dealerships to streamline their overall process of reconditioning, improving the quality of reconditioning at the same time. It is possible to demonstrate the utility of Simple Recon by illustrating a used vehicle’s typical lifecycle.
There are two common sources from where most of the used cars are purchased. The source can be an outside source such as a wholesale auction for the dealers or a trade-in. Regardless of the source, the decision to purchase is made by the buyer or used car manager by performing a mechanical, as well as cosmetic inspection. Unfortunately, in most of the cases, one or more third parties such as auction services, transportation companies, etc. are involved in the process of sending used vehicles to dealerships.
Right from the moment of purchasing a used vehicle, the dealership’s profitability tends to get threatened seriously by time. Apart from depreciation of the vehicle, there are several other external factors that have an impact on the dealership’s time constraints. As an example, the specific arbitration rules of a particular auction apply to all vehicles purchased at a wholesale auction. These arbitration rules tend to vary across different auctions. However, the arbitration standard for serious mechanical issues and frame damage has a time limit of seven days from the date of purchase. In the case of vehicles that spend many days in transportation, this limited timeframe becomes even more demanding. No dealership ever wants to own or sell cars that have mechanical problems or a damaged frame. Dealerships are often forced to pay for unnecessary but unavoidable expenses because of their inability to ensure the inspection of all offsite vehicles for arbitration issues as per the arbitration guidelines of the auction. While using Simple Recon, the reconditioning staff receives an alert whenever the arbitration deadline of seven days approaches for a car purchased offsite. As a result, the arbitration related errors and costs at the dealership are minimized or even eliminated.
After accepting a vehicle, the dealership starts the process of its reconditioning. Different dealerships or group of dealers have a reconditioning process of their own, and each of them thinks that their process is the best. Simple Recon creates an opportunity for the management to analyze their reconditioning process and its different elements. The results can be quantified to make sure that the efficiency of the process is at the highest possible level.
The depreciation expense at the dealership can be managed by reducing the reconditioning time of the used cars and the available sale time. By streamlining the reconditioning process of a dealer, Simple Recon helps them lower their depreciation and shorten their cycle time.
Simple Recon also helps the management by providing them tools that can project a sourcing plan with a high accuracy. As we have already discussed, used cars depreciate continuously in a dealership. Unnecessary expenses crop up in the frontline of a dealership that has too many vehicles. On the other hand, the sales opportunity can suffer seriously because of not having enough vehicles for selection. The key factor here is to strike a balance between these two extremes, and optimize the inventory accordingly.
Management can establish the proper inventory level required for sale by thoroughly analyzing their past sales data and tallying the same with the current level of saleable inventory and the cycle time for reconditioning. The source volume of the inventory can be fine-tuned once the speed of inventory processing through the reconditioning process is identified. This enhancement not only provides a highly optimized mix and level of inventory, but also reduces the depreciation.