Dealers Ask, “Is Your General Manager Up to Turning Recon Into a Profit Center?”

Palo Alto, CA April 25, 2016 — General managers who recognize that time-to-market workflow software is key to the dealership having a more efficient and profitable reconditioning department prepare their dealership for the slower market ahead.

Reconditioning workflow evangelists such as Dennis McGinn, founder and CEO of Rapid Recon, says GMs who create a time-to-market workflow culture among recon, service and used cars can help dealers:

  • Drive down recon costs—up to a quarter-million dollars or more a year
  • Get vehicles frontline ready in four to five days—not 10 to 12
  • Increase inventory turns 2.5 times for every five days shaved in recon

“The message from this year’s NADA was ‘be prepared.’ Dealers recognize that leaner times ahead will require other parts of their business to pick up any slack. Recon is an ideal hidden treasury,” McGinn said. “Getting a dealership to this level of recon efficiency and profitability is a GM-level responsibility.”

Every day you own a vehicle, from the time it lands on your property from the auction or released from your back office, it incurs a $32 per day holding cost that continues until the unit is retailed or wholesaled. For a typical 10-day reconditioning process, holding costs total $320 per unit until it hits the frontline plus every day it sits unsold.

If you recon 100 vehicles a month, reconditioning holding costs also total $32,000. This erodes sale gross—if the sale gross is $2,200, your actual total is gross sale minus holding costs.

“If the general manager isn’t involved in one of the highest profiting departments in the store, you might have the wrong GM,” said Tom Dunn, general manager for the Fred Martin Superstore, Barberton, Ohio.

“If you don’t care about improving reconditioning, why should your staff?” says Edward Hyde, dealer principal of the Legacy Auto Network, London, Kentucky.

Dealers who successfully establish this culture start by replacing outdated and largely ineffective reconditioning tracking methods such as whiteboards, spreadsheets, and sticky notes with automation. They assign a management-level champion to manage its daily oversight, and they use their reconditioning software to structure work and then monitor and control its outcome to specific time deadlines.

“A written process drives everything we do here—so we considered that our reconditioning was tight until time-to-market strategies tested that,” Dunn recalls. “We were certain cars were frontline ready in five days, but in fact, we were taking eight to nine days.”

J.D. Dantzler, GM for Manly Honda, part of the Manly Auto Group, Santa Rosa, California, also runs a tight ship in recon. “That means we monitor how long it takes us to move a car from acquisition to the front line. We have a 60-day policy—not just that we say that and hope for the best—because as cars age front end margin shrinks,” he says.

“We focus the used car manager on paying attention to exactly how long it is taking to get vehicles to the lot. If you see shorter front-end margins with the strict 60-day turn, your recon processes are taking too much of that highly profitable zero-to-14-day life of the vehicle.

“From onboarding forward, we play very close attention to these time frames, so that a car taking seven to 10 days should stick out like a sore thumb. Rapid Recon lets us know with a couple of clicks where each car is in the process. With Rapid Recon we’re averaging a four-day to frontline-ready cycle,” Dantzler says.

“The reconditioning department has always played a vital role in used car operations, but now particularly as the market soften,” McGinn notes.

“Now is the time to focus improving reconditioning to transfer its costs into gross. Automating recon will also eliminate bottlenecks and finger-pointing that slows progress and creates frustration. Better process communications mean knowing where vehicles are in the recon process, who are the responsible parties at each point, and how well everyone who touches recon is doing against their time-quality goal,” McGinn says.

“Faster time through the shop means greater front gross profits,” notes industry trainer Tommy Gibbs of Tommy Gibbs and Associates. “You cannot drag your feet, even for an hour.”

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