Julie Kimes remembers the battles between the used-car and service departments at O'Daniel Mazda in Fort Wayne, Ind.
"I'd go to the auction. We'd buy what we thought was a good car at a good price," says Kimes, general sales manager. "We'd get back and the reconditioning costs would be astronomical. The used-car manager and service manager were always fighting with each other."
That's because reconditioning costs often wiped out the profit the sales department hoped to make on a used car. The disparity threw Kimes' calculations out of whack, even though she was using the vAuto inventory management tool. And used vehicles are a big deal at O'Daniel Mazda, which sells about three used vehicles for every new one.
So Kimes came up with a simple remedy -- the Recon Fund -- that has virtually ended the strife.
For every used vehicle Kimes and her buyers acquire at auction or in trade, they put $450 -- the average cost to prepare a used vehicle for resale -- into the reconditioning fund. Kimes and her team closely monitor the fund and make adjustments when necessary.
The fund has brought a sense of discipline to O'Daniel's purchasing decisions at auctions, she says.
Not only does the fund cover reconditioning, it pays for repairs when something goes wrong with a used vehicle recently purchased from O'Daniel.
"I had a customer who bought a Jeep six months ago. Their transmission went out. It's completely taken care of -- $2,800" out of the fund, she says. But such big charges are rare, she says. "It's like having an in-house insurance company."
In addition to promoting better relations between the used-car and service departments, the fund keeps customers happy.
"The biggest thing is to be able to take care of the customer and not have to argue with every person in the service department, because it was a battle," she says. "Let's say you bought a $15,000 car and a month later your transmission goes out. Most dealers are not going to fix that. We're going to take care of that for you."
Kimes and her team don't mention the fund to customers.
"That is strictly internal. Customers never know we have that. They all expect something to get fixed. We don't want to leave a customer hanging."
Kimes says the fund is "not a money-making account" and there has been money left in the fund every year since it was launched in 2010. A portion of what's left over is distributed to members of the management team. Last year, there was about $16,000 left.
"Everybody got a 3 to 5 percent bonus out of those funds," which amounted to $600 apiece, she says.
Since the fund was created, O'Daniel Mazda's used-vehicle sales have been thriving in a tough market. Kimes describes Fort Wayne -- home to General Motors' Fort Wayne assembly plant -- as GM territory.
"We're a single-point Mazda dealership in a GM town. We do great business with Mazda, but it doesn't sustain the inventory I need for our used-car operation.
"We sell a whole lot more used cars than we do Mazdas. Mazda makes a great product, but you can only get so many."
The Recon Fund is just one thing O'Daniel Mazda has done to boost used-vehicle sales. Kimes also created a promotion called Monday Markdown to boost excitement around older vehicles. Customers are notified of the vehicles on sale via email.
"We pull our traditional pricing," Kimes says. "Our oldest 10 cars go to a Monday Markdown. Monday was our slowest day. Now it's our busiest. We showcased our oldest 10 vehicles at blowout prices. I'd rather retail them than send them back to auction and take a hit."
Since launching the Recon Fund, O'Daniel has steadily increased its used-vehicle sales. Last year, O'Daniel sold 739 used vehicles for a 4.4 percent share of the Fort Wayne used-vehicle market, up from 358 used vehicles and a 2.45 percent share in 2010, according to the local dealers' association.
The used-car push has helped O'Daniel Mazda win DealerRater's Mazda dealer of the year award three years running.
It's difficult for Kimes to remember what life was like before the Recon Fund. Now every car she buys fits into an overall plan.
"It's creative balancing," she says. "That's all it is."