As used-vehicle profits decline, dealers turn to software to speed up reconditioning

Software that helps dealerships' service departments prepare vehicles quickly for sale on their used-car lots has been around for about a decade. But adoption of — and competition among — these digital products continues to grow as profit pressures impose a sharper focus on reconditioning cycle time.

Dealers' retail gross profit per used vehicle declined from $2,415 in 2016 to $2,004 in 2019, the National Automobile Dealers Association reports. At the same time, average daily holding costs per used vehicle rose from $32 in 2017 to $37 in 2019, according to the automotive consulting firm NCM Associates.

Couple these factors with what Cox Automotive calls two years of high consumer demand and high wholesale prices for late-model used cars and trucks, and the importance to dealerships of tracking and expediting the reconditioning process is ever more acute.

Established software providers such as Rapid Recon, ReconAdvisor and ReconTRAC face challenges from newer competitors that claim to offer dealerships additional capabilities and advantages. In response, the market leaders are updating their products with what they call easier-to-use features and greater customer support."We can't buy, transport or service our cars any cheaper," says Jon Burkeen, corporate velocity manager for Hudson Automotive Group of Charleston, S.C., which operates 18 dealerships from Ohio to Louisiana. "The only thing we can do is try to cut down on our turn time."

He says the Hudson group uses software from Rapid Recon to monitor each stage of the reconditioning process. Hudson created Burkeen's job in 2017 to enable him to work with its dealerships to trim reconditioning times. Hudson's best-performing stores typically get used cars and trucks ready for sale within three to five days of their arrival, down from seven to 11 days before he arrived.

Bridget Townsend, Rapid Recon's vice president of product development, says a turn time of three to five days sets a high standard. Five to seven days is "very good," she says, but some dealerships are working to recondition used vehicles in less than three days.

"The quicker I can get my cars sold, the faster my inventory will turn over and the more cars I'm going to sell in a year," Townsend told Fixed Ops Journal.

Townsend says Rapid Recon software now enables reconditioning managers to track recommended, rejected and approved repairs. It also provides more data to potential buyers about reconditioning of a particular vehicle, she adds, "which allows salespeople to sell cars on the value added by the recon work."

A new player in the reconditioning workflow software market is ReconVelocity. About 265 new-vehicle dealerships are using its software, says company founder Hugh Hathcock. The cost of the software ranges from $695 to $995 a month, plus a one-time fee of $1,000 to $3,000 that the company says covers the costs of setup and training.

Hathcock warns that buy-in by dealership employees is essential to the success of any software product. "Software enables people and process," he says. "But people only use it if they can see how it makes their job easier and makes them more money."

Hathcock founded the automotive customer relationship management company ELEAD1ONE in 1999 and sold it to CDK Global last year. ReconVelocity emerged from his purchase of a smaller software company, Trace Recon, in 2018. Hatchcock says ReconVelocity's software can retrieve repair-order and vehicle inventory data directly from dealership management systems such as CDK.

In January, the company announced a module, VelocityLocate, which integrates global positioning system devices with ReconVelocity's software. This enables the software to move a vehicle from one task to the next in the reconditioning process when a dealership physically moves between processes with no need for manual data input.

Rapid Recon said it would debut a similar Bluetooth-based locating system at the 2020 NADA Show.

Like other software providers, ReconVelocity offers dealership clients training in the use of its software, and guidance on broader reconditioning practices. Company trainers visit new dealership customers for several days and return periodically for coaching and follow-up.

"We spend time with everybody who touches recon," Hathcock says. "We teach them about holding cost and velocity turn. We make sure they understand what it means to go from 12 days to six in recon."

ReconTRAC also integrates data through dealer management systems "to help track vehicles from the moment of acquisition," says Doug Grimaldi, president of Green Cloud Process, which makes ReconTRAC software. The company also provides training without a setup fee.

Vernon Auto Group of Vernon, Texas, piloted ReconVelocity software at its three dealerships, says Chris Slaydon, the company's executive manager. The group previously estimated its dealerships generally were taking five or six days to recondition a vehicle. But after it used ReconVelocity software to connect its reconditioning data with its DMS, he says, the group found its cycle time was actually 11 days.

"We tracked mechanical, detail, photos, but we weren't tracking it from the moment of acquisition in the DMS," Slaydon says. Using the software "caused us to rethink our strategy. We're at four days now, acquisition to front line."

The software also allows precise analysis of costs and revenues from reconditioning each vehicle, which affect the dealership's calculation of trade-in values, Slaydon says.

"If you come in $20,000 under your estimated recon costs for the month, some people would celebrate," he says. "But that $20,000 could have gone into trades or deals we may have lost."

Slaydon says he considers reconditioning a revenue source as well as a dealership expense. In effect, he says, a used-vehicle buyer benefits from the shop's labor and pays for it in the purchase price. "Used vehicles are our best repair customers," he says.

Workflow data generated by the software has helped make every employee who participates in reconditioning cost-conscious, Slaydon says. Recon managers get bonuses based on gross profits from used-vehicle sales, vehicle turn times of no more than five days and reconditioning costs that remain within 10 percent of estimates. Service technicians and detailers are paid more if they keep the time they spend on each vehicle to less than two days.

"Now we have detailers talking to used-car managers and asking, 'Hey, what's our gross today? What's our turn like?' " Slaydon says.

The Hudson group's Burkeen says that getting the most out of Rapid Recon's software requires designating a "team captain" of reconditioning who works with dealership service and sales managers and oversees the process.

"The software offers the kind of accountability the industry never had before," he says.

Burkeen, a former reconditioning manager for two other dealership groups, says he began hiring recon managers for individual Hudson stores last year. Half of the company's dealerships now have such managers.

His most successful hire, he adds, had no previous automotive experience but managed logistics at a warehouse. "It's all about knowing process," he says.

Burkeen says he expects further breakthroughs in product development.

"New ideas are going to push everyone to be better," he says. "The only way we can make more money is to push costs and turn times down."