“The more things change, the more they stay the same.” That adage occurred to me when a fellow NCM moderator showed me a workbook from a used-vehicle management class he attended in 1979.
He was cleaning out some old files when he ran across it and thought it would be interesting to see what has changed in the past 30 years in used-vehicle management.
The entire point of this book was to share the best practices and methods of the day to maximize profits in the used vehicle business. What were those best practices and do they still apply?
The first item, stressed as one of the most important, was about inventory turn. It was recommended in 1979 that you turn your inventory at 45 days; not 60, not 90. This was presented as the “keystone” to used-vehicle profitability 30 years ago.
Think about this. Faster turn of our inventory is not a new concept.
Every successful used-vehicle dealer I know lives by it. So, why do so many dealers continue to allow their inventory to age past the point of being able to dispose of it with the least amount of financial pain?
Maybe it's because the used-vehicle manager is primarily paid on the gross regardless of the turn. This can cause a state of wishful thinking on the used-vehicle manager's part:
“What do I care how old it is as long as I can get someone to buy it and make some gross?” Never mind that the inventory is aging and becoming lessdesirable.
Overall, fresh inventory sells at a faster rate than does aging inventory. That was true 30 years ago. It's true today. It will be true tomorrow.
In 1979, it was recommended that dealers take a more scientific approach to stocking the lot. But it was common then, as it is now, for a used-vehicle manager to walk around with all the information in his head and manage by feel.
Under such circumstances, he could never be criticized, because no one knew exactly what it was he was doing. The only gauge of whether he was doing a good job was what showed up as a result on the financial statement.
Very often, by the time the statement came out, it was too late to recover from a bad decision.
It was recommended we combat this with accurate tracking and record keeping. Records kept on every vehicle sold, gross, how fast it turned, what had to be wholesaled and average cost of sale. This information was then used to make more informed decisions on what to stock.
No big change of philosophy here. The best managers can still tell you what sells by cost, retail price, year, make, model and how fast it should turn.
The big difference is in how we track it all.
In 1979, we used a No. 2 pencil and a legal pad. Today, we use computer software inventory-management products that will do 90% of the work for us. These products allow for greater transparency and accountability than we have ever had. They also make it much easier to hold someone accountable and consciously make the right decisions based on facts; not just guesses.
In the 1979 workbook is one statement that could be argued against in today's market?
It said, “NEVER GIVE A USED-CAR PRICE OVER THE PHONE.”
I am fascinated by the number of dealers that have held to this belief in the current Internet age. It is almost as if they attended the used-vehicle class 30 years ago, and that was the only thing they heard.
The fact is we live in an age where everyone has access to all sorts of information online. The information is there, and the consumers are going there.
Yes, the more things change, the more they stay the same. Today is just like 1979 in many respects There are those that get it and those that don't. What group do you want to be in?
Go sell something.
Tony Albertson is executive conference moderator for NCM Associates. He is at [email protected].