A few years back as I was getting ready for work, I reached into the left pocket of my suit pants and found two five dollar bills. Hmmm, I thought, anything in the right pocket. Eureka, a ten dollar bill. Life is good, twenty bucks found. And off to work I went.
Around 11:00 AM the recently hired used car manager came to my office and handed me an AVO. The AVO read; reduce stock number B1000 by $500 and increase stock number 2255A by $500. Being a good soldier I followed instructions and added $500 to stock number 2255A increasing the inventory value from $6,000 to $6,500 and reduced stock number B1000 $500 decreasing its inventory value from $6,000 to $5,500. As I was making the adjustments my mind flashed back to my left and right pants pockets.
Let’s see I have a total of twenty dollars, two fives in the left pocket and a ten in the right pocket. How does that correlate to stock number B1000 that was booked for $6,000 and stock number 2255A that was also booked for $6,000?
Hmmm, I thought, a little basic math might be in order.
5+5 (Left Pocket) +10 (Right Pocket) =20
6,000 (B1000) +6,000 (2255A) =12,000
If I take $5 from my left pocket and put it in my right pocket, the equation changes to 5+15=20. And if I take $500 from stock number B1000 and apply it to stock number 2255A the equation changes to 5,500+6,500=12,000. Isn’t math amazing, the sum of the parts always equals the whole?
So does it make a difference? Oh yeah. Appraising and buying used vehicles is not a science. Today’s value may not be the same 30 days hence; with that said, why an AVO to add and reduce? After all $12,000 is $12,000.
There are many reasons why used car mangers play “Let’s Swap Dollars.” Here are a few.
The new vehicle manager asked the used car manager to step up to the plate and put another nickel in the trade
The used car manager flat out blew the appraisal
The used car manager wasn’t around to appraise a trade and the new vehicle manager did the honors
The market changed since a unit was bought at auction
Tons of unexpected reconditioning
The dealer was doing his/her neighbor a favor
Chicanery might be in play
And we mustn’t forget CYA
We all know the market dictates the value of a used vehicle. $6,000 today could be $5,200 or $6,300 tomorrow. Playing “Let’s Swap Dollars” won’t change the market or total value of the inventory and is an exercise in futility that leads to an administrative nightmare. Each unit stands on its own.
A TRUE STORY
Ace sold a new car and the trade came in at $9,000. Three weeks later Ace sold the trade and computes the gross at $2,200 after pack, cleanup and recon. With a 22% commission rate Ace expects a commission of $484 at washout time. Oh, oh Ace gets his commission sheet and it shows a gross of $1,700 with a commission of $374; the difference $110. Ace thinks the office did again. Can’t they get anything right? Off to the office he goes, the deal is pulled and there it is – The AVO, add $500 to Ace’s trade and credit another unit in inventory. No big deal, right. Well tell that to Ace. Is that a moral builder or what?
I first ran into this monster years ago when a guru convinced the dealer that push/pull was the way to go to keep the inventory in balance and move aged units. The objective was to add $100 to each incoming used vehicle and reduce the oldest unit in inventory by $100. Over a period of time push/pull would bring aged units in line with market value and make the units more saleable.
Another one of those administrative nightmares that doesn’t work.
Have a good day.