How to Prepare Used Inventory for Dramatic Increase in Leasing

How to Prepare Used Inventory for Dramatic Increase in Leasing

Without a doubt, leasing has sky rocketed since the great recession. In Q1 of 2015 the share of leases increased to 26.7% of total new-vehicle volume sales in the US versus 19.8% in Q1 of 2012. For further context, in 2009, the leasing market bottomed at a dismal 10.6%. With that said, location does become a factor. Outside of California and Florida, the Northeast dominates in lease penetration with the most, with New York, New Jersey, and Michigan having 40-48% penetration. This means that though the impact of off-lease vehicles will be greater in the Northeast it will without a doubt affect values across the country.

Given the tremendous drop in leasing during the worst days of the recession (10.6%), the overall trend for used values remained strong for years as supply of like-new pre-owned vehicles was low and demand was on the uprise. We are now entering into a pre-recession cycle of off-lease vehicles having a greater impact on the wholesale and in turn retail market. As dealers, managers, retailers and sales people in the industry, we may have forgotten the old days of used cars because the past 4 years have been ever strengthening market.

So what can be done to prepare for the inevitable impact that this leasing increase will have on our daily lives at a dealership? Don’t forget that first and foremost is to keep your pre-owned inventory moving and CLEAN UP ANY AGING NOW! Traditional smart inventory management practices that have been taught and implemented for years are now more important than ever. Second is to acknowledge that it is coming and begin to discuss it now. Whom should we talk with about this at the store? Anyone who interacts with the customer in the retail sales environment should be apprised of this information.

So let’s start with management but remember that the sales team must not be forgotten in this conversation. Management teams in every dealership
must break free of the everyday tasks that dominate life and leave at least a little room for understanding challenges, both current and potential. I would suggest that as a management team you allocate a 30 minute meeting at least once or preferably twice a month. For each meeting, assign one manager the task of researching and presenting their findings to the group (have them stay within their particular discipline within the store and give them a week or two to prepare). Anyone who takes this seriously will need to allocate some time to reading and researching for the meeting. Then make the meeting into an open discussion where ideas can flow between departments and no idea is a stupid idea. The key is to have ALL management involved so everyone can learn. Finally, each manager should go back to their respective teams and give a high level overview, and take the opportunity to dive deeper into the content that applies to the success of their team.

As an example, your pre-owned manager may already know that soon you will have a glut of off-lease vehicles hitting the lot. In some cases dealers will be required to purchase up to 85-90% of these units and in other cases there will be few to none purchasing requirements. Having this discussion with other members of management will also allow for proper planning when the units arrive so they do not clog your service department.

Next as a management team you must discuss how to create a plan that empowers your sales team with this knowledge and make it actionable in the sales process. What other techniques can be used by sales to turn the “informed customer” into an informed buyer? How do we use this knowledge in the appraisal process moving forward? How do we as a management team use this in the TO process when combatting the trade value?

In my next post, I’ll tackle these questions and give a glimpse into a few current trends in the new car market that are impacting values of similar pre-owned vehicles today.

Are You Doing Everything Possible to Expedite Your Process?

Are You Doing Everything Possible to Expedite Your Process?

Do you ever wonder how long it takes to get your inventory online?  To export your vehicles with a photo, price and description?  How much does this cost you?  What you can do to expedite this process?  These are questions I ask the decision makers of large groups across the United States daily.  If you don’t know the amount of time this takes and or the expense, then I implore you to find out. 

In a workshop that I like to administer, we explore these concepts.  The key is that we take your hard numbers and put a dollar figure to this.  Then we display these numbers to the individuals that thrive on competition, the UCM.  What will this do for my business, you might ask?  Just think about it.  How are your managers paid?  If they could make more money by simply expediting their inventory online, in turn selling your inventory faster, wouldn’t you want to have this metric? 

I use to work for a very large retailer in the auto industry.  Everything that we did had a metric applied to it.  From the time the vehicle was received until the time it was sold.  We had meetings after meetings on how we could trim this down.  Cut the fat, expedite the process.  I used to think of them as monotonous.  Here we go again, another meeting.  Hindsight is 20/20.

We were ahead of the times.  We saw the big picture and where the industry was headed.  Now ask yourself, am I doing everything possible to expedite my process?  Am I scrutinizing my business to help trim the time it takes to put a photo online or a vehicle?  How can I make more money without adding cost?  Take the time now to train and educate your team, in turn you will see the results.

Pre-Owned Operations – You’ve Must Eat Your Broccoli

Pre-Owned Operations – You’ve Must Eat Your Broccoli

Running a successful used car department is hard. It requires a high level of execution, attention to detail, solid processes, and exceptional people working with you. Failure is not often recognized immediately and it can seem like death by a thousand cuts. I would like to share with you some daily weekly and monthly job duties I have seen successful pre-owned managers execute. They are often not glamorous and sometimes go unnoticed, but are essential to success.

Daily Job Duties

  • Trade Walk – Not by yourself, bring the other managers and F&I team with you.
  • Yesterday Missed Appraisal Review – Talk through all the missed appraisals with someone other than the person that appraised the unit to be sure you did not miss something.
  • Traffic Check aka BDC Update – Today’s appointments / Tomorrow’s appointments setting progress.

Weekly Job Duties

  • Inventory Walk – Remember when it was the only way to see your inventory? Get out of the chair and walk the lot at least once a week if not every day.
  • Online Inventory Walk – Why not? Get on at least 2 websites each week and check out your inventory. Review price, photos, placement of your ads and the competition. Do a google search of your dealership. What shows up? Your job is to think and act like an online customer.
  • Wholesale Review – How did you do at the sale this week? Are prices up or down? You are the used car expert, show what you know.


Monthly Job Duties

  • Monthly Water Review – Take stocks of your entire inventory as the new guide books are released. Look for potential problems early and formulate a game plan.
  • BDC Lead Source Review – Ask your BDC for a review of all traffic sources to the dealership and a closing rate summary. Know where your best sources of traffic are and inspect weekly.
  • Expense Review – It is way more productive to see the big picture. Get involved with the review of the expenses that affect your department. Do what you can to keep costs down and maximize the tools and efforts of your people and vendors.


None of these job duties are fun. In fact, checklists remind me of when my mother always reminded me to eat my broccoli. It never really tasted that great, but the long-term effects of good habits can lead to a very healthy and in this case, profitable business.


Contact me directly for more in-depth suggestions on daily, weekly & monthly checklists from some of the top performing dealers across the country.

Costco Rises to the #2 Spot For Automotive Sales

Costco Rises to the #2 Spot For Automotive Sales

If you don’t know by now, Costco just became the second largest automotive retailer in the good ole US of A.  With almost 400,000 vehicles sold in 2014, Costco is creeping up on No. 1 auto dealer AutoNation that sold 533,000 according to Bloomberg. How did this happen?  Do they have a call center that contacts customers?  Are they spending excessive amounts of money on SEO, SEM, Pay Per Click, Retargeting, Pre-Roll Video, etc., etc. to attract customers to their automotive broker service?  Nope! So what’s the answer to their undeniable success? Fixed prices.

We’ve seen study after study that explains how the industry is changing. Each day it seems like a new trend or a new statistic. Yet one thing stays consistent. Consumers are adapting the way they buy cars. Shifting consumer attitudes have resulted in success for companies like Costco and CarMax while other car dealers have suffered from a diminished level of trust. No haggling policies have shown to succeed in the new consumer’s mindset, and many buyers have reported this leading to less anxiety during the process.

Consumers are looking for ways around dealing with the traditional car dealership “process” of buying a car, as seen by the rise of services like TrueCar. They just want the quickest way to the best price for the best value. By the end of last year, nearly 65% of car buyers said they used sites like TrueCar to validate a vehicle’s price in the market.

“Customers know more going in. … They don’t want to feel like they got a bad deal,” said Chris Sutton, vice president of auto retail for J.D. Power and Associates. Services such as Costco Auto Program “help provide customers with that confidence.”

What can we do? 

The Costco Auto Program business model caters to the rising intelligence of the average buyer, and helps make vehicle purchases smoother for customers and dealers. To replicate this process in a dealership, two things need to happen. You need to validate the price you’ve set for your vehicle online and then continue the justification process throughout the entire sales cycle. Provide customers with an educational understanding of each vehicle’s worth and then stick to it.

“Whether it is third-party sites or buying services, at a minimum they’re providing a level of expectation or limitation on prices,” Sutton said. “I think we’ll continue to see more transparency in pricing.”

To learn how MAXDigital’s Marketing & Sales Platform is validating price for consumers in dealerships across the U.S. visit or call (888) 841-0884.