Auto Reconditioning For Dealerships
In 2019, according to Kelley Blue Book the average price for a new car was just over $37,000. By comparison, the average used-car price was $20,200 for the first quarter of the year, Edmunds data shows.
According to Cox Automotive, 2019 ended the year with certified pre-owned sales up 4% versus 2018, with 2.8 million sales through December and exceeding 2018’s record–setting performance. And not only that, but Edmunds says that rising vehicle prices and high interest rates are pushing buyers out of the new market, and a record number of lease returns in 2019 will give shoppers more options than ever in the used market.
With those kind of market conditions, your opportunity as a dealership is to provide a stable of used cars that are as high-quality as your business. And those cars require a thorough tip-to-toe evaluation and adjustments as well as a proper washing before selling to a customer. Spruce up those before posting them to your site or placing them on your lot, and you’ll save yourself and your customers a great deal of time and hassle. Auto reconditioning is both art and science, and it has an effect on your bottom line.
What is auto reconditioning and how does it differ from detailing?
Auto reconditioning includes a variety of mechanical checkups. Your team inspects and adjusts, as necessary, everything under the hood, inside the interior, and on the body itself. The last step of the process is the detailing itself, which will take all of the hard work you put into updating the car and adds a little sparkle.
All those steps are crucial to establishing trust with your customers. What happens when a used-vehicle buyer brings in the car for the first oil change and discovers that the vehicle needs more than that because the vehicle was not reconditioned properly? Your reputation matters.
Here are some examples of what goes into all the aspects of reconditioning:
- Body condition: fix dents, paint imperfections, and scratches
- Engine: belts, fans, spark plugs, cylinders
- Maintenance: oil and filter changes
- Suspension: ball joints, tie rods, struts
- Brakes: inspect and replace pads and rotors, if necessary
- Interior: electrical system, heating, and air conditioning
- Exterior: lights, exhaust system
Best practices for vehicle reconditioning
A great auto reconditioning process is not only thorough for the end customers’ benefits – it must also be profitable for your business’ benefit. If you follow the best practices outlined below, your dealership can consistently strike that balance:
1: Choose the right vehicle for your dealership
Look carefully at each used car that crosses your path into your dealership, and evaluate what it needs. Researching a vehicle’s history for crashes, flood damage, frame damage, or even basic service records, is a straightforward process by checking the VIN. Give a hard pass to any car that can’t meet your standards, or plan to flip it quickly with minimal investment. Take the time to review condition reports from reputable sources in the industry and you’ll save money in the long run. Buying the right cars will offset the older cars with higher miles that require more work.
2: Create a checklist
It’s not enough to eyeball the vehicle and guess what needs to be fixed, adjusted, or replaced. Even the most basic oil lube shops have a checklist to ensure nothing is overlooked. In other words, inspect what you expect and your standard of quality will be consistent. If you can integrate technology that helps you follow a vehicle’s inspection, repair orders, and workflow through the reconditioning process, that will help you quickly see exactly what you need to know.
3: Revisit your parameters and process regularly
Set up a stand-up meeting with the team leaders in fixed operations and used car sales to compare appraiser estimates of reconditioning costs to recommended work. That way, if you miscalculated for a purchased vehicle and it needs significantly more than you expected, you will avoid getting further into debt by assessing the damage and move on to the next unit with better gross profit potential.
4: Maintain and lower costs without reducing quality
Evaluate whether factory replacement parts, brakes, tires, body repairs, and third-party body work is necessary. If the tires are halfway through their usable life, you probably don’t need to replace those. Not every vehicle needs a realignment if the test drive indicates a solid feel on the road. Whether you are offering certified used cars or not, your reconditioned work still needs to meet your dealership’s quality objectives.
5: Establish a timeline for optimal flow
Your dealership’s total reconditioning turnaround time may average anywhere from 48 hours to ten days, depending on your staff’s availability and the car’s needs. Cutting back too sharply on the timeline would run the risk of not meeting your quality standards. Extending the timeline risks too many aging cars on your lot. Find your happy medium.
6: Set the exit strategy for each car ASAP
If you know you’re acquiring a potentially problematic vehicle through a trade-in, or you discover too late that the car you just purchased is going to cost more to recondition than your parameters will allow, get it off your lot as soon as you can. A vehicle that might not work for your lot could be great fit for another dealer; according to vAuto, most dealers will need to wholesale some used vehicles to maintain their inventory turns and profitability goals. Investing in an online auction platform helps you connect with more potential wholesale buyers and sell the vehicles quickly. Selling difficult vehicles becomes even more difficult over time, so effective inventory management prevents this issue at your dealership.
Outside of this standardized process, these tips correlate with successful and profitable reconditioning operations on your lot:
Integrate an in-house reconditioning team
In football, the special teams are crucial to the game. They maintain field position, create scoring opportunities, and specialize in clutch moments. Your reconditioning team is your special team; if you set up the plays for success, you’ll win. The last thing you want to do is to force your revenue-generating services team to have to decide between spending time on a customer order or on a reconditioning. By creating a special team just for reconditioning, you’ll eliminate this conflict.
A monthly bonus plan, paid for by the used vehicle and service departments, can avoid the tug of war for gross profit margins and rewards the reconditioning team when they meet their new benchmarks.
Flat-rate reconditioning beats piecemeal work
Let’s say you set your reconditioning maximum cost at $2,000 per vehicle. That depends, of course, if the vehicle in high demand, has high mileage, or has a potential to sit on your lot longer than you’d like. Your primary goal is to follow a repeatable process in order to keep a consistent flow of reconditioned cars through your dealership. How can you balance optimal reconditioning while keeping your costs low? One way to do that is to implement a flat-rate pay plan to keep your reconditioning technicians and detailers on the same page with your fixed operations budget.
Satisfied customers spend more money and they come back to buy more cars. Good prices aren’t enough to generate repeat business – dealers need to earn a reputation of taking care of customers with quality used car inventory. A quality auto reconditioning process solidifies this reputation without breaking the bank.
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