Before 2008, Lithia's headquarters procured the used vehicles that did not come in as trades. The central office also appraised and priced all used vehicles for each store.
"When we centralized those used-car functions, the knowledge and expertise within the used-car arena in our dealerships, to some extent, were dissipated. They either left our organization or we brought them in central and we didn't move them back," DeBoer says.
Between 2008 and 2010, Lithia slowly decentralized. Today individual store managers do all of those functions for their stores, giving them "ownership" of the used-car operations, DeBoer says. Lithia's headquarters still supplies data trends and analytic information.
"It's shocking what ownership will mean," DeBoer says. "You'll incentivize them differently, you'll merchandize them differently. You're going to make sure that car sells and sells for a decent margin when you're the one who bought it."
Tony Jimenez, general manager of Lithia's Oregon City Subaru store, says buying and selling used cars is a team effort.
"I'm at the auctions, my used-car manager is at the auctions, and we have managers at the store here working on Craigslist and AutoTrader to buy used cars," he says. "That's the key to success, having a lot of people working on it and mining those deals. One person is not enough."
Jimenez says the store sells about 80 used vehicles a month, up from about 50 a year ago. He says having the responsibility of procuring and pricing used cars makes it easier to sell more.
"It only makes sense to have the people who are talking to the actual customers go out and buy the vehicles," Jimenez says.
The used-car business has evolved from a decade ago when one used-car manager could buy used cars, stick a price on them and put them out on a lot, Jimenez says. It requires a team constantly monitoring the Internet for competitive prices and available inventory, he says.
"You don't go out and look at your lot first thing every day," he says. "You get on the Internet and look at your pictures and other vehicle information."
To help its stores improve their used-car business and boost volume to the next level, Lithia is increasing training at the store level. Many salespeople need to learn new skills, such as an ability to sell brands beyond the store's new-vehicle brand or brands, DeBoer says. Lithia has hired outside experts to help stores better procure used cars, appraise them and price them right, he says. For some, it has worked.
But many of Lithia's stores still struggle, DeBoer admits.
"We're still feeling the pains of [centralization] because probably half of our stores still lack the understanding and aggressiveness that it requires to run a profitable used-car department," he says.
Lithia CFO Chris Holzshu says turning used-car inventory is key. Lithia wants its used cars to sell within 60 days, DeBoer says.
"The older a vehicle gets" on the lot, Holzshu says, "the less money you're going to make because the salespeople don't believe in the car anymore."