The automotive industry is changing. The average operating profits for dealers dropped by roughly $105,112 in 2018. It’s now down to -$13,338. Expenses as a percentage of gross profit climbed more than 2 percentage points from 98.7% up to 100.2%. All of this comes straight out of NADA’s recently released annual financial profile of America’s car dealerships. This all seems like bad news for dealerships. But the story is still far from finished.Here’s how you can take these changes and turn them to your favor, simply by changing your mindset.
What Is An ‘Operational Mindset’?
Operational thinking involves taking a more systemic and holistic approach to doing business. You look at each area of your business. Department by department. Task by task. You find the actions that generate the most revenue or the most savings and you pursue them. This is followed by regular assessment of these actions to ensure that they should still be a priority. This is all a bit abstract at the moment. Now let’s give some concrete examples of how you can implement this type of thinking in your dealership.
Implementing Operational Thinking In The Dealership
Instead of focusing on selling cars, you need to view each and every vehicle as an investment. From there, it’s up to you to find out how to maximize that investment. In order to do this, you need to examine each and every step of your operation to see how they interact with each other and how — if at all — they are helping you get a better return on your investment.
This is in contrast to the more simplistic mindset of “sell more cars, make more money”. This may have been something you could get away with in the past, but it’s no longer viable. You need to be more savvy. Now that you understand operational thinking a bit better, let’s get even more concrete. One of the areas where used vehicle dealers can realize the most savings is in their used car reconditioning process.
Making The Most Of Your Used Vehicles
When it comes to selling used cars, there are two main areas where dealerships make mistakes. First is in the acquisition of their used vehicles. It no longer makes any sense to keep a fleet of used vehicles out on the lot ready and waiting to be sold. Each day a car sits on the lot it loses a significant portion of its value and the cost to market percentage goes up. By day 30, you may not be making anything off of the sale at all. You need to utilize market research to ensure you acquire used vehicles that will sell and sell fast.
This doesn’t just apply to cars already on the lot either. That’s where mistake number two happens: having an inefficient used car reconditioning process. Your used vehicles begin declining in value the day you purchase them. That means every day that they are stuck in your reconditioning process is a day that you’re losing money. Changing this requires knowing where your bottlenecks are. With ReconTRAC you can track every step of the reconditioning process from start to finish, allowing you to pinpoint areas of inefficiency. Please, contact us today for a free demonstration of our ReconTRAC software.
