Service departments face renewed pressures to recondition used vehicles

Mark Foster, executive manager at Walker Cadillac-Buick-GMC in Carrollton, Ga., hasn't taken the profit-sharing step yet, although the dealership has been a Lescota client. But he agrees that money invested in making reconditioning more efficient is well spent.

Foster's dealership employs a full-time reconditioning manager. That hiring decision, Foster says, caused his used-car manager to complain that "all you are doing is making a fortune for fixed ops." But he says the added attention ensures that no aspect of reconditioning is slighted, and identifies where to spend money usefully to improve the process.

What happens, Foster asks rhetorically, when a used-vehicle buyer returns to the dealership for a first oil change and discovers that he or she needs new tires or brake pads because the vehicle was reconditioned badly?

"Is that customer coming back to buy a vehicle from you again?" he asks. "Probably not."

Cox Automotive forecasts U.S. sales of 39.5 million used vehicles this year, compared with 16.7 million new cars and light trucks. Cox predicts that 3.9 million leased vehicles will return to dealerships in 2018, and that the number of lease turn-ins will continue to grow until it peaks at 4.3 million vehicles in 2020.

Because leased vehicles tend to be newer than trade-ins, they generally require less preparation for sale as used cars and trucks. But all require some reconditioning.

Used-vehicle prices are likely to decline in 2018 because of abundant supply, says Tom Kontos, chief economist at ADESA Analytical Services. High-quality reconditioning is an essential way for dealerships to differentiate their used vehicles, he says.

"Otherwise, you will just be following the market down," Kontos says.

Dealers and fixed ops managers have more tools than ever to measure the efficiency of their reconditioning operations, and to stream-line them. Younger dealership executives are more willing to embrace technology that enhances the reconditioning process, says Doug Grimaldi, president of Green Cloud Process, a Jacksonville, Fla., company that provides software called ReconTRAC.

The product enables dealers and service managers to follow a vehicle's inspection, repair orders and work flow as it goes through reconditioning, Grimaldi says. More than 260 dealerships buy the software, he says, at a cost of $300 to $700 a month.

ReconTRAC also includes preset prices for parts, speeding cost estimates for reconditioning work, Grimaldi says. If a part isn't on the price list, he adds, "our system allows the [service] technician to electronically shoot a price question over to the parts department."

Jeremy Miller, service director at Koch 33 Toyota and Koch 33 Ford in Easton, Pa., says using ReconTRAC has cut reconditioning cycle time at the dealerships from 12 days to four days.

As soon as a vehicle arrives at the dealership, ReconTRAC alerts the service department that it has reconditioning work, Miller says. It also creates purchase orders for outside work, he adds.

His dealerships are reconditioning about 500 vehicles, Miller says. Without the software, he says, "there is no way I could keep track of all the cars."

Other dealerships and dealership groups, such as Birchwood, have developed their own reconditioning software. Birchwood, which sells as many as 600 used vehicles a month, has an in-house team of business analysts who study data on each reconditioned vehicle to determine how to improve the process, Greer says. To that end, the company also employs five software developers.

"We can fully recondition a vehicle, including photos and videos, in less than five days, including weekends and holidays," Greer says.

A common concern among dealers is determining whether it is more cost-effective to keep reconditioning work in-house or to outsource it. Dale Pollak, founder of vAuto, a provider of dealership management software, says dealers need to examine carefully their payments to outside suppliers for reconditioning jobs.

"With margins under pressure," Pollak says, "dealers would be wise to take a closer look at these costs and trim them where they can."

Birchwood is firmly in the do-it-yourself camp. In 2015, the group opened a 40,000- square-foot reconditioning center that includes a full body shop. The center enables Birchwood to do all the exterior reconditioning on a car or truck, Greer says.

"We have 100 percent return on investment when we invest in exterior reconditioning," he adds.

For dealerships that outsource reconditioning work, several products enable dealers to monitor vendors' productivity. Among them is software from iReconCars in Columbus, Ohio. Mike Boyd, the company's CEO, says his product tracks the cost of a vendor's service, the amount of work it does and the time it takes to recondition vehicles. The software also allows dealers to compare vendors' performance.

The software, which has 25 dealership customers, costs $399 a month. Vendors have their own portals in the iReconCars system, Boyd says, and can see when their reconditioning work is scheduled to begin and to be completed.

"Now vendors understand that if they don't complete their job in a timely manner, they are holding up the next person in the production line," he says.

Marc Cox, general sales manager at Tansky Sawmill Toyota in Dublin, Ohio, says the iReconCars software has improved his reconditioning process "1,000 percent" by helping him keep his vendors accountable.

The software shows where a car or truck is in the reconditioning process, and which recon workers — internal and external — are lagging, Cox says. A slowdown is expensive, he adds, because a vehicle doesn't move to the next vendor until the current one finishes its work.

"We run between five and seven days" to recondition a vehicle, Cox says. "If you are on a 60-day turn [to sell the vehicle], you are already five days into that 60 days."

Other vendors handle the entire reconditioning process for dealerships. Manheim's Retail Reconditioning Solutions service will recondition any car or truck, whether bought at one of the company's auctions or delivered by a dealership to one of its recon centers.

The work includes a multipoint inspection, repair of mechanical problems and detailing. Dealers pay Manheim a variable rate for the service, depending on the amount of work a car or truck needs. Turn time for vehicles is four to 10 days, depending on a client's needs, Manheim says.

"The big advantage is time saving," says Angie Babin, Manheim's vice president of reconditioning.

A growing trend in software is helping dealerships make their used vehicles stand out through the reconditioning they get.

Dennis McGinn, CEO of Rapid Recon in Palo Alto, Calif., claims his company's software saves the average dealership $19,000 a month in reconditioning costs. About 1,000 dealerships use the software, at an average monthly price of $600.

McGinn says salespeople at Atlanta Toyota in Duluth, Ga., part of Penske Automotive Group, use a feature of the software to identify repairs and enhancements that would make a used vehicle appeal to a potential buyer before it undergoes reconditioning, and then pitch those upgrades to sales customers.

McGinn calls it "creating a story" about a car or truck. He says, "A good salesperson can use the heck out of it."