Forecast Alert

by dpollak on 07/22/2014 · 0 comments

Nugoose Island 2014 Forecast Alertmerous reports are filtering in from across the country citing geese delivering root beer. Sightings have confirmed that these are not drones, but in fact real geese. Consultation with forecast analysts confirms the fact that there is a 100% chance of root beer delivery from coast to coast. Experts advise all affected populations to immediately ice and consume the shipments with friends, family and coworkers.

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I received a note from a Velocity dealer asking for guidance to trim $100 to $200 from his reconditioning costs, part of a broader effort to increase used vehicle profitability.

1953 Chevrolet Corvette 300x168 Are You Asking The Wrong Question About Used Vehicle Reconditioning?It should be stated that this dealer is a smart operator who’s already wrung significant costs out of his reconditioning processes. He’s reduced mark-ups on parts to roughly 33 percent, and uses lower-cost, aftermarket parts to recondition vehicles that do not meet factory certified pre-owned vehicle program requirements.

Aside from lowering the retail labor rate used for reconditioning work or scrutinizing repair orders (ROs) to eliminate any “padding” by technicians, I didn’t see any sizable opportunity to cut more cost out of the picture.

Then it hit me. Perhaps the dealer, and others who are reexamining reconditioning costs to improve profit margins, may be focusing on the wrong aspect of their used vehicle retailing operation. The real problem, I thought, may well lie with the costs dealers incur to acquire inventory. If they pay too much, there’s really no amount of cost-cutting in reconditioning that’ll improve a vehicle’s profit potential.

In other words, while it’s good for dealers to continually ask, “what is the right amount of money to spend on reconditioning?,” the more important question should always be, “what is the right appraised value of a vehicle, given the likely costs needed to ready the vehicle for retail?”

The latter question is especially important in the current market. Wholesale values remain relatively strong and dealers are hungry to put customers in new vehicles—conditions that make it easy to over-pay for a used vehicle.

I liked how my friend and Velocity dealer Brian Benstock of Paragon Honda, White Plains, N.Y., addressed this challenge in an AutoRemarketing article this week.

“We cannot make the same mistakes that we used to make by overpaying for a car and worrying about that later on down the road,” Benstock says. “You have to buy it right from Day 1. You have to make sure you’ve taken all of the known factors into consideration from Day 1. And, frankly, you’ve got to be more judicious in purchasing the vehicles.”

With this approach, the costs required to recondition a vehicle effectively become a cost of doing business, which dealers can pass on to customers if a) it’s reasonable and b) they understand the hows/whys behind the reconditioning work. As Benstock says in the article, vehicle sellers and buyers “tend to be very understanding” of reconditioning costs if you take the time to explain them.

I complimented the Velocity dealer who contacted me for recognizing that consistent cost efficiencies in reconditioning are essential to profitable used vehicle operations. I also urged him to look a little further up the food chain to his acquisition process, where I suspect he’ll find far more than $100 to $200 in margin opportunity on every car.

 

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photo 1 300x206 Achievement, Ambition and Blind Faith with Brian Benstock of Paragon HondaLast Friday I had the privilege of conducting a mid-year review with the management team of Paragon Honda, Paragon Acura and Honda of White Plains, New York. All three of these dealerships are under the management and control of Brian Benstock. My experience with Brian and his management team on both Friday and Saturday were extraordinary life events.

Okay, how can a business meeting with a dealership group be an extraordinary life event? Well, the answer is for several reasons. First, it starts with the experience of knowing and working with Brian Benstock. At so many different levels, Brian embodies qualities to be both admired and respected. He has the ferocity and determination of a lion, and at the same time, possesses the intellect and sensitivity of a scholarly priest. In other words, he operates with deftness at a wide range of human, social and intellectual levels.

Brian’s extraordinary qualities are exemplified by the appearance, professionalism and performance of his dealerships and personnel. An outsider of New York approaches the dealership in Queens with the weariness of one entering an urban jungle. Crossing the threshold of the dealership’s front doors, one’s environment is transformed from an uncertain chaotic environment, into one of orderly activity. The facilities are immaculate, the personnel are friendly and professionally attired and one gets the clear impression of a well-executed Broadway performance. There is an upbeat energy in the air that defies the outside physical environment. One immediately knows that they’ve entered a special realm.

The meeting with Brian’s team was equally as motivating. Although I met many new people, I was warmly greeted by dozens of managers with whom I’ve made acquaintance over the 8 years of our relationship. The team was willing to accept my challenge to raise their game to an even higher level. Unlike many such experiences, Brian’s team eagerly accepted constructive criticism and the challenge to do even better. Unlike so many dealerships, Brian’s personnel are humble and eager to change. These qualities are all the more impressive in light of their clear dominance in new and used vehicle sales on a national basis. In short, one could not ask for a better team than Brian has assembled in the Paragon and White Plains organizations.

photo 4 202x300 Achievement, Ambition and Blind Faith with Brian Benstock of Paragon HondaThe most extraordinary experience of my visit this past weekend occurred on Saturday when Brian invited me to run with him through Central Park. So what made that experience so special? Well, let’s start with the fact that Brian, at age 53, is a marathon athlete capable of running 26 miles at approximately 7 minutes per mile. As if this wasn’t intimidating enough, I accepted Brian’s invitation with great reservation considering the fact that I can’t see. Although I love to run, I’m not capable of running at Brian’s level, nor was I comfortable running in an unfamiliar and crowded environment like Central Park. I repeatedly tried to decline Brian’s invitation to run, but he insisted that I accept.

Well, I have to say that it was an experience of a lifetime. The day was perfect, not too hot with a sunny blue sky. We agreed that we would run the 4+ mile loop around the northern end of the park. Brian gave me repeated assurances and confidence as we approached the park. I imagined everything going wrong, including not running fast enough, bumping into other runners and cyclists, and most frightening of all, the potential of injury to myself or others.

As we began to run, I immediately realized that I was in a good place and company. From my initial strides, Brian began a constant stream of communication, informing me of terrain, traffic and surroundings. While I couldn’t see much in the bright sunlight, I could see absolutely nothing in the frequently shaded areas of the track. I quickly discovered that I was running with complete blind faith in Brian. I think it’s fair to say that very quickly, Brian and I achieved a mutual understanding that we were running as one. Quickly my fear and inhibition melted away in favor of a sense of freedom and overwhelming emotion of joy. Moreover, my excitement was even heightened by the clear sense that Brian was enjoying the experience as much as me. I was completely in his hands, and he was completely in control, and together we were sharing an experience of a lifetime.

photo 5 231x300 Achievement, Ambition and Blind Faith with Brian Benstock of Paragon HondaThe rest of the day and weekend, and in fact, currently as I write, I cannot stop smiling when I think about the experience that I shared with Brian at both his dealership and in the park. I’m truly privileged for the relationship, experience, knowledge and friendship that I have derived from Brian. He is truly a treasure.

Brian, thank you, thank you, thank you for all that you have done for me and for the experience that we shared together last Saturday. I will treasure it for a lifetime.

(Watch and listen to Brian explain the up hill terrain to Dale )

 

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