Page 18 - GIADA-April2017

INDUSTRY INSIGHT

Two Perspectives on Sourcing Auction

Vehicles

BY DAVE POLLAK, CHAIRMAN AND FOUNDER, VAUTO, INC.

Let’s imagine there are two dealers in the
auction lane, bidding for the same car.

The first dealer wants the car because he’s
sold a few of the same units recently, and
did pretty well in terms of front-end gross.
The three-year-old car has about 40,000
miles, and looks/smells pretty good. The
CARFAX notes the car is “clean,” with
“one owner.” The dealer’s checked NADA
and MRR values, and thinks he can bid
up to $17,300 for the vehicle, essential-
ly the mid-point between the wholesale
benchmarks, and make an estimated
$2,000 front-end gross profit.
2) Market insights make a key merchandise and price the vehicle for a fast
The second dealer has similar past expe- difference. retail exit. But chances are good he’ll get the
rience with the vehicle, and also thinks
it’s a decent car. Like the first dealer, he To be sure, the second dealer would have job done, and make twice as much money
knows the vehicle’s retailing for roughly loved to acquire the car for less than in the time it takes the first dealer to find,
$19,500 in his market. But he also knows $17,700. But for him, it made all the acquire and retail a vehicle that passes his
test for a front-end gross objectives.
something else about the car the other sense in the world, even with a likely re-
dealer doesn’t. The vehicle has a respect- tail selling point of $19,500. Why? First, In the months ahead, dealers will likely see
able Market Days Supply of 55—a semi- the dealer knows all the math. His auc-
fast seller if he prices it right. tion-buying tool calculates roughly $800 even more competition in the lanes and
in fees, reconditioning and other costs— online. The reason: As new vehicle sales
leaving roughly $1,000 in potential gross. decline, and draw even fewer trade-ins,
The bidding starts at $16,500. It quickly
climbs to $17,500. The first dealer bails While not ideal, the dealer also knows dealers will turn their attention to auctions
out when the auctioneer asks for $17,700. that the vehicle’s Market Days Supply of for the inventory they need to achieve their
The second dealer raises his hand and 55 means he can likely make the $1,000 in goals for increased sales and profitability in
owns the car. the next 10-15 days and, in two to three used vehicles and beyond.
weeks, he’ll redeploy the same capital on
While this scenario is fictional, it rep- another unit. This outlook begs a question for every
dealer: What new insights, perspective and
resents three important facets of sourcing 3) The rise of a “total gross” perspective. tools will you use to ensure you know the
auction vehicles in today’s market:
The second dealer’s decision reflects exact auction vehicles to pursue and make
1) Cars are won/lost by fairly narrow an understanding that in today’s mar- your money every time you acquire one? n
margins. gin-compressed environment, it’s just _________________________________
You could credit the first dealer with a as, if not more, important to acquire Dale Pollak is one of the leading author-
decent degree of bidding discipline. He and retail vehicles that help you achieve ities on automotive dealership manage-
stayed in the hunt, and even went past his a faster through-put of retail sales than ment strategies. In addition to being a
original bid maximum, to try and get the focus solely on front-end gross profit. best-selling author on Used Car Sales
car. But the extra $400 was too rich for By doing so, dealers effectively ring the in his book Velocity, Dale Pollak is the
his blood. He probably looked at the oth- cash register more frequently—in used chairman and founder of vAuto, Inc., a
er dealer and thought, “That guy’s crazy. vehicles, parts, service and F&I. Indeed, company that provides retail automotive
dealerships with a better way to appraise,
He over-paid and he’s not going to make the success of the second dealer’s deci-
any gross when he tries to retail it.” sion to purchase the vehicle for $17,700 manage and price their pre-owned vehi-
will fully depend on his ability to properly cle inventory.

16 | GIADA Independent Auto Dealer APRIL 2017