Turn, Baby, Turn

Sell as fast as you can, for as much as you can, with as few costs as possible.

That’s the formula for successful vehicle remarketing, according to John Manchin, Subaru of America Inc.’s national fleet remarketing manager.

Well, those are nirvana-like components for any money-making venture, whether it is used cars, new cars, pencils or widgets. (BTW, what exactly are widgets?)

Sometimes the best place to sell off-lease program vehicles is “downstream” at auctions, Manchin says. Other times it’s "upstream" at dealerships, where either the lessee likes the car enough to buy it or the profit-minded dealer likes it enough to put it on the used-car lot.

“We can’t take everything out of the auction lanes because that’s where the market values are set,” Manchin says. “You need that downstream environment.”

He adds: “In upstream, we are setting the price. In downstream, the buyer sets the price. As sellers, we tend to set higher prices.”

Manchin is among attendees at a recent National Remarketing Conference where experts bandied about ideas.

Here are some from different front liners:

The importance of quick inventory turns:

“Our whole used-car focus is on turn; on selling a vehicle in the first 30 days,” says Chris Little, director-variable operations for Hendrick Automotive Group. “If you do that, you are so much ahead.”

The Findlay Automotive Group is trying to get sales people concentrating on turning inventory faster rather that going for super-high grosses that may slow things down, says CFO Tyler Coder.

A sales staffer is further ahead financially by selling a car with reasonable gross every 15 days vs. selling a car with a great gross every 45 days, he says.

The total gross on the three cars will be better than the one high-gross car that took a long time to sell.

“On the used car side, it’s the turn,” Coder says. “It wasn’t key a few years ago. If you do it right and consistently, you’ll get good results. We got sloppy when times were good. Not now.”

To spur turn, turn, turn, the 135-store Sonic Automotive dealership chain pays sales people on units sold, not gross margins, says national used-vehicle director Hal McLarty.

Quick turns depend on stocking the right vehicles, he says. “This is not the time to speculate on what might sell.”

Inventory management software helps determine local market demand and potential pricing for various used makes and models. Such a systematic approach eliminates a lot of guess work and typically trumps a used-car manager’s gut feeling about which cars to stock.

Even some old-school types are becoming believers. When Hendricks first started using inventory-management software, “some of our people thought it was the devil,” Little says. “But now they are walking upright rather than crawling on all fours.”

Still, he says, “I want my guys to know a human runs the used-car department. I want the human element. But I also want the market intelligence, knowing for a fact what’s popular and what sells.”

Pricing:

“You don’t have to be the lowest price, but you have to be relevant,” Little says.

Adds Coder: “If there are 20 cars in a market, and we’re number 17 on price, we’re not going to get the phone call.”

Where to buy vehicles to replenish inventory:

“Our owner base is the biggest place to get inventory from,” Little says. “You can pull people forward. We use algorithms to determine who we can get out of a car.”

That allows Hendrick to sell those existing customers new vehicles and put their old ones on the used-car lots of the group’s 26 stores.

Sonic is “buying cars out of the service department,” McLarty says.