For a brief introduction and background...I have been the Used Car Manager at Anderson Honda in Palo Alto, California since October of last year. I came in fresh off of reading Dale Pollack's second installment of Velocity and even though I'd like to characterize myself as a humble, teachable, smart young guy, I must admit there was a good amount of hubris that I carried into this new position as I thought to myself "how hard can this really be?" Boy have I learned a lot over the last several months.
One of the biggest and most costly lessons so far has been when and why to wholesale front line cars after they have aged a certain amount of time. For the first few months our team had this idea in our heads that we need to turn these cars as fast as possible by reconditioning our merchandise and getting them published online within 5 days while giving them roughly 30 days to sell. The first half of that formula was not the issue. The problem with trying to force these cars to sell within such a short time frame was that many of them were sent to auction prematurely right after picking up some real steam online which equated to wholesaling roughly 4-7 front line cars per week. Ouch. After a few months of wholesale losses that I will refrain from stating here out of embarrassment, we extended that expiration date out to roughly 60 days. Since then our front gross has increased tremendously and our wholesale loss has been cut by over 60%. This tweak in our process has really got me thinking a little more especially after a conversation with my GM this morning. Why wholesale front line cars at all? After all, what do most other retail stores do with their distressed/aging merchandise? Well, that's where we get clearance specials and sales right? Why not just mark them down until the market recognizes the value and someone is compelled to come in and pay a retail price (which granted, might be closer to wholesale book at that point). At least you get the opportunity for back end revenue and a happy customer by selling retail. After spending $1000+ on reconditioning, pack, detail and sometimes body work why just give that all up to the book sale with no chance for finance revenue or a referral? I know there will always be situations where it makes sense to get off of a car and re-alocate those funds to merchandise with a better chance of selling (especially if the wholesale market is bidding the price of that particular car up) but I'm starting to think this should be the exception, not the rule. Anyways, that's all for now.