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Making the most of every vehicle investment

Five Pointers to Improve Your Used Vehicle Reconditioning Process

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Article Highlights

  1. Best-performing dealers get reconditioning done in 24 hours or less.
  2. To maximize a Used vehicle’s profit potential, steer clear of acquiring vehicles that require significant reconditioning work and determine each car’s exit strategy before acquiring them.
  3. Set up a baseline cost for reconditioning and allow the Service Department to complete the work when estimates fall below the threshold.

By Dale Pollak

Founder, vAuto

You’ll get a range of responses when you ask dealers how much time it takes to recondition Used vehicles. The best-performing dealers these days consistently get the get the job done in 24 hours or less. Meanwhile, other dealers report their reconditioning turnaround times run seven days or more. The disparity owes to two chief factors: The degree to which the dealer recognizes that time spent in reconditioning translates to lost front-end profit potential, and the extent to which a dealer implements and monitors processes that reflect the “time is money” reality of retailing Used vehicles.

Following are five best practices I’ve gleaned from dealers who have transformed their reconditioning processes to minimize delays and maximize the profitability potential of every Used vehicle:

1. STEER CLEAR OF PROBLEM CARS AT ACQUISITION

This seems an obvious point, but some dealers and their buyers lose their acquisition discipline when they’re desperate to fill gaps in their Used vehicle inventories. The result: They look past (or don’t check) AutoCheck, CARFAX and other condition reports, bringing home vehicles that require significant reconditioning work. The dynamic amounts to “throwing good money after bad” as they pony up for costly repairs that could have been avoided.

2. DETERMINE EACH CAR’S EXIT STRATEGY RIGHT AWAY

This best practice goes hand-in-hand with the one noted above — that is, dealers should not be acquiring vehicles at auctions that lack the condition or market appeal (e.g., Market Days Supply) that indicate positive potential as retail units. Of course, trade-ins are a trickier prospect, especially if the dealership stepped up to acquire a unit and complete a retail deal. In these instances, dealers and their managers should collectively and quickly determine if a unit has retail potential. A best practice: Gather the appraisers and decision-makers once a day to review trade-ins and make the retail/wholesale determination.

3. ESTABLISH AN “AUTO-APPROVAL” FOR RECONDITIONING WORK

This best practice helps minimize delays caused when a Used vehicle manager cannot (or doesn’t) approve reconditioning work in a timely manner. Dealers who use this approach set up a baseline cost for reconditioning ($600 to $800 per car is common) and allow the Service Department to complete the work when estimates fall below the threshold. Some dealers resist this best practice out of a fear that their service department will “stitch up” the repair order to the maximum amount on every car. “That hasn’t been a problem at our dealership, but we monitor whether estimates match up with the final cost,” a Northeast dealer says.

4. MAKE RECONDITIONING SPEED A PRIORITY

For some dealers, this means giving up on the tug-of-war with service directors and managers who often regard customer pay work as a higher priority. In these stores, dealers will create a separate team (often a manager/writer, with up to five technicians, depending on volume) who focus solely on fast, yet thorough, reconditioning work. The manager’s compensation package typically emphasizes the need for efficiency and speed, with bonuses tied to meeting the store’s 24- to 72-hour reconditioning benchmark.

Other stores give the responsibility for managing reconditioning to the Used vehicle manager. The manager then works collaboratively with his/her counterparts in Service to craft and execute the processes that enable the dealership to recondition vehicles in an efficient and timely manner.

5. LOOK FOR WAYS TO LOWER COSTS

Beyond profit-minded decisions that guide the scope of reconditioning work on individual vehicles, a growing number of dealers are examining their internal labor and parts costs to ease pressure on their front-end profit margins. These efforts often result in decisions to charge less-than-retail rates for labor, use lower-cost, non-OEM parts (e.g., brake pads, tires, wiper blades, etc.) and tighten their oversight of outside vendors who handle small dent/body, upholstery and window repairs.

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