Going Beyond Most Used-Car Operations

There may be no better example of what a franchised car dealer's used-vehicle operations should look like than Ft. Myers Toyota.

But first you might have to get through the crazy stuff such as 27 high energy video episodes at www.superstoreworldrecord.com highlighting the dealership's run last year at what it claims is a world record for retail used-vehicle sales for a single-point dealership.

As part of the video promotion, Ft. Myers held a talent show for employees and customers over several weeks along with several other events, just to build momentum.

For the record, the Florida dealership, which is owned by Bill Templeton, claims it set the record (how many of you knew there was a record for such things) selling 719 used vehicles in July last year.

With the videos and the self-proclaimed record, Ft. Myers' General Manager John Marazzi was sending a not so subtle message to Josh Towbin, otherwise known as ‘Chop, the King of Cars,’ who owns Towbin Dodge in Las Vegas, who, in previous years, has claimed to be the No. 1 franchise dealer in used-car sales.

“These guys and gals are the real ‘King of Cars,’” says Chuck Ardezzone, producer and president of Introuble Zone Productions, the company that produced the videos.

According to Ward's data, Ft. Myers Toyota was the top selling franchised used-car operation last year and likely will lay claim to the title this year.

In a market of only 350,000 people, the Florida dealership is averaging 650 used-vehicle sales a month this year — up from 470 a month in 2006. Compare that with the industry average of 44 monthly used-vehicle retail sales for the typical dealership.

Despite its braggadocio and crazy promotions, Ft. Myers Toyota is a dealership firmly grounded in the basics.

Admittedly, the basics can be boring — great location; consistent training; a staff Marazzi says he would put up against any other store; and using software to help manage its inventory — but staying true to them allows Ft. Myers to take its business to a level that is far beyond most used-car operations.

Marazzi, who has been the general manager for 16 years at the store, says they are able to think long term with the business.

“Most general managers don't have that luxury,” he says. “Their long-term focus is three months.”

Part of that long-term focus includes trying to keep customers for life. So far, the used-vehicle department retains 60% of its customers.

Marazzi takes the radical approach limiting the front-end profit on used-vehicle sales to $3,000 a deal while capping finance and insurance profit to 1.5%. “We make the profit we deserve to make,” he says.

Rather than burning through customers by trying to squeeze them for every last dollar, Marazzi believes the strategy helps bring customers back.

The store takes a unique approach in that it treats all of its sales operations as stand-alone businesses.

For example, the used-vehicle department is its own franchise. Marazzi, in the last couple of years, has even turned the certified program into its own operation. Averaging 150 certified units a month, Ft. Myers is one of the top five Toyota dealerships for selling certified pre-owned vehicles.

As a stand-alone business, the used-vehicle department also has its own service department with 48 technicians. The facility sits on five acres and includes 43 service bays and 10 detail bays.

Each customer test-driving a used vehicle is taken around the service department, whether they are buying a Toyota or another brand. “We want them to know they are our customers,” Marazzi says. “We want to keep them coming back to our dealership.”

There are times when Ft. Myers has to send a non-Toyota vehicle it is servicing to its brand's dealership to be repaired.

“They've figured out what we're doing,” Marazzi laughs. “It's becoming a problem. They'll put us to the back of the line. Sometimes it'll take them a couple of days to get it back to us.”

In 2006, the service department averaged 1,050 vehicles a month, although it has the capacity to service 1,800 a month. “We'll get there,” Marazzi says.

When Marazzi first came to the dealership, he noticed none of the area's retailers were focusing on vehicles in the $10,000-$15,000 price range whose buyers typically are payment customers.

“Nobody was paying attention to that niche,” he says. “And they still aren't. It's been huge for us.”

Ft. Myers Toyota Offers These Tips for Cooking Up a Great Used-Car Operation

Employees

Ft. Myers Toyota tries to hire and keep the best people. The interview process is formalized. Prospective employees go through a 3-tier interview process beginning with the used-car manager, then five frontline managers and concluding with General Manager John Marazzi. There has to be 100% agreement among the managers for a person to be hired.

“I don't allow any yelling, swearing or cursing,” Marazzi says. “That's ‘80's car business. We're past that.”

Training

Each employee, upon being hired, undergoes seven days of intense training —— much of it conducted by Marazzi. After that, there are systematic weekly and monthly training sessions. Although the dealership periodically brings in consultants, it has developed its own training course through the years.

Marketing and Promotion

The used-vehicle department spends $135,000 on full-blown TV ads, three full-page newspaper ads every Saturday and some radio spots.

The sweet spot is in television, according to Marazzi. “We do what we do in used sales because of TV,” he says. Short, 15-second spots resonate well in the market for the store.

Ft. Myers uses AutoBase's customer-relationship management system and maintains a detailed database so it knows where each customer is at in the lifecycle of their vehicles.

“Nothing is left to guessing,” Marazzi says. “We know everyday how to market to our customers.

The dealership also uses CallCommand to place birthday and anniversary calls to customers.

In July, Ft. Myers Toyota sent 22,000 e-mails to its customers kicking off a summer campaign.

Inventory

Ft. Myers has a full time used-vehicle inventory manager whose job it is to procure the right vehicles. The store pays several independent buyers to acquire the vehicles at auctions around the country. “We pay them $150 for each vehicle they buy for us,” Marazzi says.

Marazzi also employs one full-time buyer. “He was my first used-car manager here,” he says. “He treats the money he spends buying vehicles as his own. And he knows what we need.”

Appraisals

Ft. Myers Toyota uses JMSolutions' AAX Inventory Management Solutions software to help appraise vehicles coming in on trade. Marazzi runs a report every week for the Monday managers' meeting showing every manager how they stack up against each other in the appraisal process. “It keeps them accountable,” he says.

Reconditioning

The store spends $850 on reconditioning expenses for each vehicle. All of that is factored into the appraisal price.

Additionally, Marazzi budgets approximately $20,000 a month in goodwill costs to cover certain things not covered under warranty.

Pricing

As a rule, Ft. Myers prices every vehicle $500 above N.A.D.A. Guide values. “That gives us a little wiggle room so we can work with the customer,” says Marazzi.

Of course, it helps to be big. “We can also accomplish a lot more with our banks because of the volume we do,” Marazzi says.