I’m proud to report that vAuto’s Conquest system is a finalist for this year’s Chicago Innovation Awards.

This honor comes after a group of judges selected Conquest from more than 500 other innovations from Chicago-area organizations.

If you’re inclined, we’d appreciate your support for a People’s Choice Award, which goes to innovations that receive most online votes. You can vote here until Oct. 14.

Thank you.


I’d recommend that every dealer conduct the following three-part test of their used vehicle department:

Step 1: Determine your average cost of inventory. How does this figure compare to three or six months ago? Is it up or down, and by how much?

SCadillac Muscle Car 333 HD Wallpaper 300x187 A Three Step Test To Improve Your Used Vehicle Department Performancetep 2: Assess your inventory age. What percentage of your inventory is less than 30 days old? What percentage is older than 30 days? How have these figures changed, if at all, in the past three to six months?

Step 3: Calculate your average front-end gross by vehicle age. What’s the average front-end gross for vehicles retailed within 30 days? After 30 days? What’s the difference between the two? Remember this number.

The test helps identify operational problems that can slow the pace and profitability of your used vehicle sales. It’s a useful test at this time of year as fall arrives. Being what they are, the summer months can cause diligence and discipline to dissipate as the mercury rises. Used vehicle performance suffers. Sales slow, and grosses go.

As you take the test, here are some points to consider for each step:

Step 1: If you’re like many dealers, your average cost of inventory has likely headed north—despite month-over-month declines in wholesale vehicle valuations. Hopefully, the increases owe to conscious decisions to accept a higher acquisition Cost of Market ratio as you acquire vehicles from auctions or trade-ins. This scenario is particularly true for dealers that proactively participate in factory certified pre-owned (CPO) programs.

But be honest with yourself: How much of the increase really owes to appraisers offering too much, or buyers simply purchasing the easier-to-find (and more expensive) late model units at auctions?

The best-performing dealers strive to acquire and recondition every used vehicle at a Cost to Market ratio below 85 percent. This ratio, which compares the unit’s cost to prevailing retail asking prices, sets the baseline profit margin potential for every unit. As dealers work to beat this benchmark on every used vehicle acquisition, they effectively keep a lid on the average cost of inventory.

Step 2: If you found more than 50 percent of your used vehicle inventory is older than 30 days, you’ve got at least one problem—your cars aren’t selling fast enough to maximize your gross profit and minimize risk, given today’s market. This is why I recommend dealers maintain at least 50 percent of their used vehicle inventory under 30 days of age. To achieve this operational standard, dealers make it a priority to acquire the right cars for their market, and use pricing and online merchandising as primary, time-sensitive levers to attract buyers and sell the unit quickly.

Step 3: OK, so what was your number? Was it eye-opening to see the difference? If you’re like most dealers, you probably see a steep decline in the average front-end gross profits after 30 days in inventory. In fact, if you look closer, you’ll likely notice a handful of vehicles propped up your average front-end grosses after 30 days, while the rest of the vehicles were effectively money-losing units.

This part of the test reveals a stark retailing reality in used vehicles: You can’t really expect to make a sufficient return on investment on used vehicles once they age past the 30-day mark. This fact of life can be difficult for dealers to accept—and it’s a key reason why the most profitable and successful used vehicle retailers have made 45 days as the final cut off for every unit. Period. End of story.

Perhaps the best part of the test is that it offers useful insights for any dealer.

If you’ve felt like you’re not selling enough used vehicles or making enough money, the test should reveal some operational priorities that help you achieve both. And, if you’re among the dealers who feel satisfied with your used vehicle performance, I suspect the test identified an area or two where your team can improve.

Either way, the test is over. The results are in. What’s your next step?



I typically find it’s time well spent to keep an eye on how CarMax is doing. That’s why I reviewed this week’s release of CarMax’s second quarter results and related earnings call transcript.

Three items caught my attention and seemed relevant for all used vehicle retailers:

1. A disciplined, efficient, technology-driven vehicle purchase process. Dealers and their buyers sometimes marvel at how much CarMax buyers seem willing to pay in the lanes for vehicles. During the earnings call, CarMax CEO Tom Folliard offered a quick overview of the company’s auction purchase process—an impressive approach that suggests their buyers know exactly what they’re doing:

“We are much more organized today than we were 10 years ago. We’re much more analytical about the way we approach car buying at the auction, and I think we’re in a better position today to optimize the inventory that we acquire at the auction because of all the analytics that we’ve put into it and all the digital capabilities that we’ve given our buyers. Our buyers are now all using tablets at the auctions. We’re tracking every single car that a buyer at CarMax looks at at the auction and deciding whether or not that car is worthy, and then the next time a buyer goes to the auction, they don’t have to look at that same car and we’re saving an enormous amount of time in evaluating cars at the auction. We have all the auctions on a program where the CarMax buyers are buying under one kind of generic card, and we can analytically decide where those cars go later.”

2. A robust “we’ll buy your used car” program. I initially viewed CarMax’s reported 8 percent increase in wholesale unit sales and an 18 percent increase in wholesale profit ($951/car in the second quarter) as troubling signs. After all, CarMax is in the retail car business. Then I remembered: They’ve long touted the “we’ll buy your car even if you don’t buy ours” promise for years. The wholesale volume and profit increases reflect the success of this committed initiative more than any retail shortcomings. CarMax’s effort also signals its belief that engaging a customer in the dealership, even if they only want to sell a clunker, is an opportunity to seed a future retail sale—a useful insight for dealers struggling to make their own off-the-street purchase programs more successful.

3. A recognition that today’s buyers are different. CarMax has embraced the idea that today’s buyers would welcome the opportunity to complete at least some parts of a vehicle purchase online—and they will reward dealers who do so. Here’s a quick overview that Folliard offered in response to an earnings call question:

“What we are trying to do is make sure our customers can do as much of the transaction as they want to do from home. We’ve definitely seen the sentiment shift where customers are looking to do more and more research, more and more pieces of the transaction from home, and in some cases the entire transaction from home. Our current capabilities are our customer can obviously do all kinds of inventory searches….We also give the customer the ability to put a car on hold. We give the customer the ability to transfer a car. If it’s a paid transfer, they can do it with a credit card without speaking to anybody and have that car transferred to the store of their choice. They can fill out a big chunk of the paperwork from home. We have tested online credit applications, and we are continuing to enhance our capabilities there. We’ve seen some start-ups and some smaller competitors that are doing kind of beginning-to-end transactions online. I don’t think anybody is in a better position than we are to be able to do those things, and those are some of the things that we’ll continue to work on and continue to evaluate as our business grows.”

The key point here is that CarMax is going further than other dealers when it comes to facilitating deals online. My colleague, Mike Burgiss of Cox Automotive’s MakeMyDeal, says it’s not uncommon for dealers to offer online tools, but they use the tools to generate leads, not actually work deals. “This remains a disconnect for many dealers, and an opportunity for those who make the shift to what I call a ‘connected commerce’ model for selling cars,” he says.

As I finished my review, I couldn’t help but think that while some dealers might not like CarMax, it would be foolish to ignore the rationale and reason behind their ongoing success.


3 Factors That Impede New Vehicle Sales, Market Share Growth


  For many dealers, the new car business is increasingly all about volume.  This reality doesn’t hold for every new vehicle—particularly in cross-over and truck segments that continue to be sought-after purchases by consumers and yield respectable grosses.  But overall, the business is less about front-end gross profit, and more about volume, than it has [...]

0 comments Read more from Dale →

Combatting Margin Compression Podcast


  On August 25th, Thomas Williams from AutoSuccess and I had a discussion regarding combatting margin compression.  Please listen to our discussion and let me know your thoughts.

1 comment Read more from Dale →

Hireology CEO Talks Dealership People, Processes and Recruiting


The common denominator for high performance are the people in your organization. This simple statement comes as a surprise to no one. In spite of this wide-spread recognition, few dealerships give sufficient attention to the process of recruiting, interviewing and screening perspective employees. Just like everything else, there are proven best practices. The link below [...]

0 comments Read more from Dale →

Three Reasons Dealers Are Unhappy Amid A Strong Market


(AutoSuccess magazine’s blog published a post from me today. I thought I’d share it here, too.) I found myself asking why dealers might be unhappy, despite a new vehicle market that has, and continues to be, quite strong. The question follows an Automotive News article about the recent Dealer Attitude Survey conducted by the National Automobile Dealers [...]

0 comments Read more from Dale →

3 Ways To Increase New Vehicle Pricing Efficiency, Profitability


  I’ve been getting requests from dealers recently to help them evaluate their performance in new vehicles. The inquiries follow dealer concerns about ever-smaller margins on the new vehicles they sell, and a desire to increase market share and volume while maximizing the profitability for every retail unit. These discussions have revealed three curious findings: [...]

0 comments Read more from Dale →

How To Avoid Two Common Sins Of Summer In Used Vehicles


It’s not uncommon for dealers to commit two cardinal sins in used vehicles as summer gets into full swing. The first sin is the impulse to beef up used vehicle inventory to drive additional sales. Every summer, it seems, I hear from dealers who plan to add 30 to 50 units to their used vehicle [...]

0 comments Read more from Dale →

Cox Cares


  I often say that Cox is one of the best companies to work for in America. One of many large examples is evidenced by the below note from Jim Kennedy, Cox’s Executive Chairman and Cox family member. In addition to genuinely caring and supporting fellow Cox associates in times of need, the family and [...]

1 comment Read more from Dale →