At last, used cars drive profits for N.Y. dealer
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Printed in Automotive News June 20, 2011
Suzanne Cochrane, general manager of Helms Bros. Inc. in New York, struggled for years to sell 15 used vehicles a month at the company's Mercedes-Benz dealership.
In 2005, the used-car department's losses became substantial. Cochrane won't say how large they were, but the red ink prompted her to fire her used-car manager, disband the department and turn its operations over to her new-car sales manager.
Then in 2009, inspired by a factory-backed program on how to make money on used vehicles, Cochrane:
• Hired a new used-car manager and started analyzing the sales potential of used vehicles each day.
• Banned wholesalers -- agents who buy used vehicles from dealerships -- from the store.
• Began using inventory-management software to understand used-vehicle price trends in her market.
• Certified as many used Mercedes-Benz vehicles as possible.
The new way of doing things shifted the focus from how much the dealership paid for vehicles to how much those vehicles would sell for, Cochrane says. "It was a totally different mind-set," she says.
The changes, coupled with cost-cutting moves made more urgent by the recession, allowed her to sell 250 used vehicles in 2009, slashing losses in the used-vehicle department.
In 2010, the dealership sold 400 used vehicles, generating what she calls a "significant" net profit for the department. She declined to be more specific.
It's quite a turnaround.
From 2000 to 2005, the store went through four used-vehicle managers. One left; Cochrane fired three. Those managers mostly bought vehicles they personally liked, she recalls. But for whatever reason, they weren't getting the job done.
But in late 2008, she joined a Mercedes-Benz USA program to help dealers improve profitability through certified used vehicles. Hired by the factory, NCM Associates Inc., an Overland Park, Kan., consulting company, spent a year helping Cochrane improve used-vehicle operations. In November 2009, she hired her current used-car manager. A department that previously drifted through management changes without clear procedures now follows specific processes.
For example, Cochrane, her used-vehicle sales staff and service writer do regular walk-around critiques of used vehicles. They discuss whether anyone has a potential customer for each trade-in vehicle, whether the vehicle needs reconditioning and at what cost.
If a used vehicle has been on the lot for 20 days, they ask why it has not sold and whether it would be better to wholesale it and move on.
The used-car manager no longer calls wholesalers to ask how much they would pay the dealership for unwanted vehicles. The process often drew three or four wholesalers in a single day to the dealership, which Cochrane found disruptive.
Now her inventory-management tool gives her wholesale price information. The dealership moves vehicles earmarked for wholesale to an off-site lot. On Mondays, the store faxes information about those vehicles to wholesalers. Potential buyers look over the vehicles on Tuesdays and then bid in a silent auction on Wednesdays. The highest bidders are notified Wednesday evenings.
Cochrane says the change is less intrusive and more profitable. "The difference between what two wholesalers are willing to pay for a car can be thousands of dollars," she says.
In the past, Cochrane also struggled with certified used vehicles. She had a difficult time justifying the outlay to recondition a vehicle not knowing whether there was a buyer willing to pay the higher price of a certified vehicle.
Now, committed to the certified program, she spends to meet the certified standards first and finds a buyer second. In 2010, about 80 percent of the used vehicles the Mercedes store sold were certified, up from about 40 percent before the changes at the dealership. In April 2011, 25 of the 30 used vehicles the dealership sold were certified.
You can reach Arlena Sawyers at asawyers@crain.com.
