Don't laugh when you read what Brian Benstock did a couple of years ago — because most of you have been burned making similar moves. The question is, did you learn from them?
Benstock, vice president and part owner of Paragon Honda and Acura in Queens, New York, took what he learned and propelled Paragon Honda to the brand's Certified Dealer of the Year spot.
He thought he was being slick when he bought a dozen used Ford Windstars at the auction for approximately $12,000 each.
Three months later, not one van had been sold — probably because there were more than 400 Windstars for sale at the time around Queens, with days supply exceeding 120.
“We kept moving them from one section on the lot to another,” Benstock says. “I swear they were multiplying.”
He eventually wholesaled them, taking a big hit. That was when Paragon was turning its used-vehicle inventory over once every 18 months if they were lucky.
“We don't make those mistakes anymore,” Benstock says.
In 2006, Paragon shot up to become Honda's second best-selling certified pre-owned (CPO) dealer. In 2007, its 1,542 CPO-Honda sales bested the number two dealer by 40%- and it made more than $3,000 a copy on those sales.
And 2008 will be even better. As of February, Paragon's CPO sales were up 53%.
While most stores are still trying to figure out how to respond to Internet leads quickly, Benstock figured out the real benefit the Web provides is the ability to price vehicles in such a way they fly off the lot.
“We stopped looking at our inventory as gross per unit,” Benstock says. “It really is dollar per space per day. It's all about the velocity of our turn. How many times in a given year can we turn our used inventory? When you have a fixed amount of parking, like we do here in Queens, it's important to keep those vehicles moving off the lot.”
He invested in an inventory management tool developed by Dale Pollack and V-Auto, which provides dealerships with Web-based intelligence that helps them price their used vehicles in relationship to the competition's.
Someone is assigned to massaging the used vehicle prices daily, something Benstock says is critical.
“Sometimes, minor changes in pricing can keep your vehicle near the top on those Internet sites,” Benstock says.
While that intelligence has taken most of the homerun deals away, because consumers likewise have become smarter, Benstock says the market has become more efficient providing dealers with greater predictability in their used inventory. Which leads to fewer — if any — wholesale losses. “Eliminating aging inventory ultimately leads to better grosses,” Benstock says.
He also uses that data to acquire vehicles at the auction and in trades that will sell. He says his folks are better equipped to appraise the trade today then before.
“That's the real challenge — becoming better on the acquisition side,” Benstock says. “There's no stealing a car today. You have to pay what it's worth.”
Although, used car managers probably won't like ceding some of their control to Web-based data, Benstock says to give it time. One of his used-car managers actually doubled his salary last year.
Consider the ripple effect, which helps the entire dealership. Better trades lead to more new-vehicle sales, in addition to used sales. It helps with employee retention.
And if your store focuses on CPO sales, as does Paragon, you can drive a lot more business to the service and parts department.
Benstock, at $1,500 a vehicle, perhaps spends more than he has to on reconditioning vehicles to make them eligible for CPO status. But, he says, that's what his market requires — “If you want to do the right thing.” But that adds revenue to the fixed operations part of the business, while increasing customer satisfaction.
Benstock says he hasn't added salespeople the last couple of years, in part because of the business development center, which handles all of the leads that come into the dealerships.
Paragon has developed a well-earned reputation the last few years for being one of the leading dealers using the Internet — placing in the top five of the Ward's e-Dealer 100 several consecutive years.
“The BDC (which is run by Ashley Antonio) is the most important part of our process,” Benstock says. “More than 50% of our customers set appointments now.”
White Plains Honda
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Ward's e-Dealer 100 Rank: