Profit Over A Coffee

Profitability can be challenging sometimes, as we all know. I recently met with a group of dealers that, in varying degrees, all shared the same concern: make a profit, more profit and keep that roll going!

But at the core of our discussion, over coffee, the issue really came down to a couple of points: more customers and more quality pre-owned vehicles. At which point, I sipped my coffee, and found that reality a bit funny. In the age of technology, we are still trying to find higher quality pre-owned vehicles, and more of them.

I am fairly confident that during the time spent drinking our coffee, yet another physical or online auction has opened up somewhere with yet some more inventory. Maybe if we just can find the right inventory, profitability would rise, as well.

Or is it that the cost is just too high? Auction prices are climbing. There are the hard costs associated with getting vehicles to the physical auction. The time spent online making sure pricing is in line with the market is costly. But are we collectively missing something here?

Recently I wrote about a new type of auction that is springing up, one that possibly addresses these issues from another perspective. They are the dealer-to-dealer subscription-based auctions.

Now before you walk away from your cup of coffee and this column, just read the next paragraph. If you’re still not satisfied, come have lunch on me at NADA in Orlando, where I will be presenting and discussing this new concept (seriously, email me if you want in on lunch).

Here is how this basically lays out. The seller can post vehicles with no sale fee, and the buyer can buy cars with no buy fee. Now what does that really mean?

A typical auction transaction costs the buying dealer about $281. Through sites like DealerMatch, AutoFlipr, Dealers Link, Dealers Forum and others, that expense is eliminated.

In reality, you have more bidding room; very nice, but as we have all said to our kids, “We’re not there yet!”

Add to this equation: that the seller for the vehicle has not had to pay the average sale fee of $193, the average transportation cost of $42 as well as other costs like gas and the auction re-wash of $28.

The seller now has $253 in price flexibility and has not touched the vehicle. Wholesale accountability has been preserved, and some of these sources have floor plan options, that dealers want these days.

In the end, these channels can provide, on average, $550 of additional deal-making flexibility between buyer and seller.

To this I ask, how often have we missed purchasing a vehicle we want for $500–600? How many vehicles would we have wholesaled, and faster, if we were $500–600 closer on the bid amount?

How much would your dealership add to the bottom line through faster wholesale purchasing and selling? You won’t know until you try it, and really, what do you have to lose?
 
Was this worth having coffee and discussing? I don't know about you, but for these dealers, it is not often that they have a cup of coffee and discover they could instantly improve their bottom line profit. ‘Til next month, see you in the lens of the lanes.
 

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