Perhaps it’s telling that, as of today, no one has commented on the Automotive News piece that discusses how dealers will face a “tough slog” in the months ahead in new cars.

The reason, I suspect, is the fact that dealers, and pretty much everyone else in the industry who’s paying attention, has long understood that sagging new vehicle sales are inevitable, given the record numbers dealers have sold in recent years.

You can count me among those who’ve been impressed by the resiliency of the new car market this year, despite the headwinds.

But the Automotive News article included a quote that gave me pause, and suggests dealers had better recognize that if their new car inventories were hospital patients, they’ve moved from the waiting room to the operating table.

The quote comes from Jeremy Acevedo, manager of industry analysis at Edmunds.com, who discusses how OEMs are more selective in their incentive spending to help dealers sell cars:

“Manufacturers seem to be comfortable with a longer sell down period that leverages targeted incentives instead of an aggressive ‘everything must go now’ mentality.”

This statement seems accurate and it reflects yet another fresh reality in new vehicles—more and more, dealers will be on their own to move the inventory that isn’t selling.

The older inventory has become costly. NADA’s Dealership Financial Profile for July suggests that the average dealer is on pace to pay $60,000-plus in interest expense for the calendar year. Not long ago, many dealers counted floorplan credits as a profit center.

These circumstances call for greater attention to new vehicle inventory age management, and your local market itself. Just as in used vehicles, the fundamentals matter. Here are three to consider:

Sell the old stuff first. I had the same opportunity when I was a dealer in the high-interest days of the ‘80s. Every month, a sizable share of our sales included our freshest cars—even though we had copies of the units we’d just sold parked out back. The same problem exists today. Across many dealer inventories, I often see 50 percent of dealers’ new vehicle investments tied up in vehicles older than 120 days. This ratio suggests an imbalance that’s now up to you to fix. From here on out, these cars need to be prioritized in your sales and marketing efforts, and parked where sales associates can easily find them.

Mind your dealership/market days supply balance. The most investment-healthy new vehicle inventories reflect a balance between dealership days supply and market days supply across model lines and trim configurations. If you assess and tweak this balance as you order inventory, or trade with other dealers, you’re taking a step to minimize the risk of age and interest expense from the get-go. A rule of thumb: The larger the gap between these two metrics, the less likely you’ll be able to capitalize on market opportunities.

Price based on vehicle’s market appeal and value. To do this effectively, you need a clear view of where your competition’s vehicles are priced, and the fair market range today’s buyers expect. The good news: Today’s technology and tools can help you execute a pricing strategy that reflects the value of each new vehicle for potential buyers, your competitive market and your inventory investment objectives.

Even as dealers contend with the “slog” ahead, it’s worth remembering that while the new vehicle market softens, no one’s projecting that it will fall off a cliff. This outlook means that every step taken today to improve inventory management efficiency will help your new vehicle sales and profitability in the more difficult months ahead.

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This week brought a significant milestone for Cox Automotive, the car business and me.

On Wednesday, I was part of a group that cut the ribbon to officially open the new Cox Automotive Solutions Lab at Northwood University in Midland, MI.

This lab is pretty special.

First, it reflects the commitment of the Cox family, and Cox Automotive, to the future of the car business. Cox leaders recognize that we have a responsibility to help prepare the next generation of dealership owners and managers for what will be a fast-changing, ever-more complex retail environment in the years ahead.

Second, the lab will be a proving ground that gives students the opportunity to put theory—like Velocity Method of Management principles—into practice. In the lab, students will sharpen their understanding of what it takes to run a dealership, and make money, in today’s margin-compressed market. They will gain important skills, like how to use technology and tools to mine insights about the market and their businesses to maximize efficiencies and profitability.

In short, the lab will help students hit the ground running as they work in their dealerships, and carry the responsibility of effectively managing their family/organizational fortunes.

I’m proud to be part of an organization like Cox Automotive that gives back to the industry that feeds it. My hat’s off to the people at Cox Automotive and Northwood University who came up with the idea of the solutions lab, and applied themselves to bringing it to life.

While at Northwood, I had the honor and privilege to give an academic year kick-off speech to students. I’ll be honest. I worried about what I’d say. Among the 800 faculty and students at the convocation, only some aspire to retail automotive careers.

I landed on three principles that I’ve come to view as key ingredients for a meaningful, productive life. A few folks suggested I publicly share a video of the speech. Here it is:

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Where Can I Buy Cars?

by dpollak on 08/23/2018 · 2 comments

The below is a post taken from my good friend and industry training expert, Tommy Gibbs’ Zinger.

Where Can I Buy Cars?

If I get asked this question once a week, I get asked this question 100 times a week. It’s generally phrased as, “We can’t find inventory, do you have any suggestions?”

These are smart, intelligent dealers and managers asking the question. These are people who are true “car guys and gals.” They are not new to the game and they know what end is up, yet they still ask the question.

They know the answer. But they hold out for a miracle that I have a secret tunnel that I can connect them to that has some gold at the end.

To quote my good friend and mentor Dale Pollak:

“The reality is that there are plenty of cars available in the wholesale market, but the margin opportunity for most is very, very small.”

So there you have it. Dale has spoken and I shall interpret. There’s inventory out there, but you can’t or won’t pay the price.

You won’t pay the price because:

You haven’t accepted the fact that units you purchase aren’t going to have much of a profit margin.

You haven’t accepted the fact that you will need to turn and burn those units.

You haven’t accepted the fact that total gross is more important acceptedverage gross.

You haven’t accept the fact that packs and high recon costs are adding to your woes of paying the price.

You haven’t accepted the fact that paying on gross profit further complicates the retail selling process.

You haven’t accepted the fact that you need to create a greater awareness on look-to-book.

You haven’t accepted the fact that mining your customer base for potential sellers is worth more than a 60-day trial run.

You haven’t accepted the fact that the number one issue of low grosses is you sell too many units late in the life-cycle.

You haven’t accepted the fact that many good things come to the table when you find a retail buyer at some number.

These are just a few of the things you haven’t accepted, that are causing you not to be able to find the inventory you need.

It’s important to know where to buy cars. It’s even more important to know why you aren’t. That’s all I’m gonna say, Tommy Gibbs

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Musing on Major League Baseball and Used Cars Metrics

08.17.2018

A New York Times piece this week highlighted a couple trends in Major League Baseball that some find disturbing. This year, for the first time in league history, there may be more strikeouts than hits through the course of a season. And, of the hits, home runs will account for a sizable share, perhaps more […]

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A YouTube Video Prompts A Stroll Down Memory Lane

08.14.2018

My Facebook feed brought a pleasant, if random, surprise the other day. A childhood friend, Jim Ballard, shared a YouTube video (below) from a guy who apparently explores, and films, scenes in and around Gary, IN, where I grew up. In fact, Ballard and I were next door neighbors. For whatever reason, the videographer chose to […]

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How To Fix The Collapsing Ceiling In Used Cars

07.25.2018

If you had the unfortunate experience of living in a house where the ceiling was slowly collapsing, you’d face one of two corrective choices. First, you could prop up the ceiling. I imagine this would involve using 4’ by 4’ posts, or maybe a metal beam, in the spots that sag the most. Second, you […]

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A Metric That Merits More Attention—Your Used/New Sales Ratio

06.06.2018

When I was a dealer, we thought we were doing a pretty good job if we managed a .5:1 used-to-new-vehicle sales ratio. If we retailed 50 new Cadillacs a month, I expected that we would also sell 25 used units, which were almost always Cadillacs. A recent Automotive News piece suggests that, since I was […]

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3 Pillars Of A Stellar Used-to-New Vehicle Sales Ratio

05.07.2018

A recent Automotive News article discussed how, even among top dealer groups, it’s difficult for some dealers to achieve a 1:1 used-to-new-vehicle sales ratio. The article noted that among the top 100 dealership groups ranked by used vehicle sales, less than 20 groups achieved a 1:1 used-to-new ratio and, among those, only nine achieved a […]

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A Dealer in Distress

05.04.2018

I received the below note from a dealer experiencing a very stressful Spring selling season, but probably not for the reason you think. Note from dealer: Hey Mr. Pollak, hope all is well and you are having a blast doing what you do. Wanted to say hi and give you an update from your biggest […]

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Automotive News Addresses Used Vehicle Margin Compression

05.03.2018

This week’s Automotive News includes an article that addresses the very real problem of ongoing margin compression in used vehicles. The piece quotes my colleague, Cox Automotive economist Jonathan Smoke, and me sharing our views on the factors behind the -$2 average net profit per used vehicle retailed that dealers achieved in 2017, a figure […]

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