The Dealer Playbook
The Dealer Playbook

Episode · 8 months ago

Jasen Rice: Improve Your Used Vehicle Process

ABOUT THIS EPISODE

Jasen Rice is the founder of LotPop.com, the wildly successful firm that helps dealers improve gross and volume. He's an expert at all things vehicle sales and merchandising, and joins the podcast to share his wisdom about how car dealers can improve their used vehicle sales process. 

A year ago (2020), Jasen joined the show to explain how used vehicle inventory would be the saving grace for dealers through the pandemic, and he was right. Today, he shares the best way for dealers to leverage the current (2021) used vehicle climate to grow their sales operation.

Noteworthy topics from this episode:

2:09 - Where do you see the auto industry heading in the next few years? What trends are you noticing?

7:57 - Do the house prices affect auto sales? How does inflation play a role in the auto industry?

9:56 - Are there tried and true processes that worked pre-pandemic and work currently?

14:37 - What would you recommend for dealers with a shortage of inventory?

19:19 - How many tools as a dealer would I need to be able to compete with Carvana and others?

24:11 - What are the most common broken processes you have noticed?

Connect with Jasen Rice:

LinkedIn: https://www.linkedin.com/in/jasenrice  

Facebook: https://www.facebook.com/lotparty 

Connect with Michael Cirillo:

LinkedIn: https://www.linkedin.com/in/michaelcirillo 

Facebook: https://www.facebook.com/michaelcirillo 

Instagram: https://www.instagram.com/michaelcirillo 

Website: https://www.thedealerplaybook.com 

...the car business is rapidly changing and modern car dealers are meeting the demand. I'm Michael Cirillo and together we're going to explore what it takes to create a thriving dealership and life in the retail automotive industry join me each week for inspiring conversations with subject matter experts that are designed to help you grow. This is the dealer playbook. Yeah, Well I've been looking forward to the return of my guest today since the last time we spoke on the podcast. He's the president and Ceo of Lot Pop, an automotive tech company and consultancy that is helping dealers keep a pulse on what's happening in the market and how to adjust inventory related processes to meet the demands. Jason Rice, welcome to the dealer playbook podcast. Hey, thanks for having me. Thanks for having me back actually. Yeah, Well, I mean it's, I felt it appropriate because I mean the last time we spoke, uh, you shared how used vehicle inventory would really be the saving grace through the pandemic and by and large, that's exactly what happened. That that was absolutely true. And I think it's still true. Even at, at the time of recording this. Uh, and I mean thinking about what's happening currently for all of those that care to know what happens in the year 2045, there's chip shortages. I mean there's just a whole slew of things going on that are preventing new vehicles in particular from shipping to dealerships. Um, I guess my first question is interestingly enough, Jason, I just finished another call. I had a conversation with someone about how business is a lot like chess and I know that you like to look forward similar to a chess game you like to look forward. And I've really built a name on looking forward um Several steps ahead. What do you think The name of the game will be for inventory merchandising or management moving into the next 3-5 years on the back of everything that we've experienced, sure we'll want to you know yeah being a chess player that's actually one of our core values as a company always be thinking uh five moves ahead. But um you know and that's the other thing not to toot my own horn but you know the other thing at last april I put my back out there. We might have talked about it about C. P. O. Having uh being one of the winners coming out of this and they just had another record I think 12 or 15% increase in CPO sales. So you know you just know that new cars is going to be a struggle. I will continue to be a struggle. So you know one of the things that I'm looking forward to talk about years down the road couple couple of years I have is especially even the new cars because they take the biggest hit is all these customers buying them well above sticker you know on some of these cars so how are they going to be able to get out of these things? Um, you know, short term concerns is, you know, I don't know. And then again, this could be a far stretch, but I'm worried about, let's see what april or october and november brings when it comes to, you know, do these read rental car companies, you know, they're the ones that went to the lane, drove up all these values because they can, they can pay five grand over asking price or mm are just because they'll make up the difference and renting the car out and they're very successful at that. If you have a rent a car lately and, and the fees they are charging. So will they as vacation stops as this new delta things start spreading this travel, start going back down and they start letting some of these cars go while the wholesale still high. So that's one of my immediate concern because anything that dealers buying right now is going to be aged in october and going into november. So if they start dumping cars both for a strategic standpoint of getting as much money as they can before the, if before the market, if it drops one and then two for business, you know, tax write off for any losses for that year. Um, so that could be a benefit for them to...

...do that. If they do, somebody commented when I made that comment and said, why would they, if they're not going to get a new new supply? So, well, well next year, if they need to buy more, they'll do what they did this year, stand at the lane and pay too much money for him and overcharge it for, for rental fees. So to me that it would be my nearest concern coming forward. But yeah, 23 years down the pipe and these people are trying to trade these cars in. What are the values gonna be, what's the market going to look like? And if it's any, if it goes back to any kind of normal market, they're going to take some big hits. Um, and so how do dealers get out of it? You know, the, the domestics might win that battle and I say that because they tend to have higher rebates, 358 grand, 10 grand rebates. I've seen at one point in time on some cars and those type of rebates might help some of these people get unburied where, you know, the Hondas and the Toyotas of the world's don't really run too big of incentives. So that might be a big shift. Um, you know, if, if they might have to gain some market share there. But yeah, that's my biggest concern is dealers being able to get these people out of these cars. Um, if they try to tear them in and then, I mean, yeah, and as you're saying all of this, it makes perfect sense. I'm taking these notes and I'm thinking the far reaching impact is on dealer, but it is also on consumer and then what is the impact on credit gonna be, you're gonna have all this negative equity rolling around in the market, dealers are gonna have to figure out how, like you said, how to get people out of these, these units, consumers, credit scores perhaps might might not be very good. And so you're gonna have, do you see maybe a surgeon in the subprime market? Yeah. Well, it depends. I mean, if it's a, if it's a decent customer, I think banks will have some kind of leniency on, okay. We understand that two years ago you were, you know, for two months, you ran into a covid situation, you've straightened yourself out since. So there might be some of those, um, you know, the biggest thing is, will people get back to where the government pulled the money away from people that aren't working right now? You know, because you know, right now they're, they're, they're getting the money, um, to stay at home. If they yank it, will they still just try to stay at home and that's when they start going past due on their bills. Are they actually going to start getting jobs and will the jobs to be there? You know, you go into this again, this stupid masked and government mandates and stuff when they start seeing things down. And then, so when the government pulls money, you know, it could be bad time and they pull money and then all of a sudden they shut down, they got to reopen its gonna be a confusing party, whoever knows, But you know, I'm liking the prospect of the fact that I don't think they'll shut things back down. I think that you know, force these mass mandates force people back to, you know, and then hopefully they ain't the money away and get people back into work. And I think that stimulates the economy keeps that here, people in the credit situation, the housing market something to be scared about that affected obviously the 08 recession, which a lot of dealers had to deal with and lost a lot of sales that way is the housing market crunch. Um So you know, I started seeing that foreclosure, but I think the government extended those things out to where they can't, you know, start yanking houses out from underneath people. So um whenever that happens, which I don't know if it will here in the near future with this new covid variant coming out there um that we have to worry about that, I think credit should be okay or at least um enough to where banks will have some leniency unless people have, you know, true foreclosures and and and repos and stuff stuff for any company to do that right now. So yeah, that makes total sense. Now, side note, do you see, have you seen historically, where when housing is kind of unaffordable, that vehicle sales increase and vice versa, like when people can afford houses, they tend not to buy vehicles. Mhm. When they can't afford a house, they don't buy vehicles, you know I mean?...

Yeah, you know that's the other thing, it's just overall inflation. I don't, I don't know if it's the buying the big stuff, it's the daily stuff, their gas, you know, goes up from, I mean shoot, I was just noticing this over three bucks a gallon now and I remember when I got the four right? And so you know those are the tight skirt and then buying groceries all of a sudden you got to spend 100 extra bucks a month and groceries, another 100 bucks, two bucks a month And gas or something, then there goes my, my new car, you know that $200 extra I was going to spend on a car, new car payment went out the window. So that's more what I'm afraid of them. You know the housing stuff, you know, you're just gonna watch the housing market if that starts crashing, that's a trickle down effect for a lot of places. One of the things keep an eye what I've always heard and I don't know if it's true as far as patterns is and when it comes to the economy and stuff is watch like the RV market because you know that that slush funds, you know, people don't buy an RV if they're struggling money wise, but if they are doing good, um, you know, RV sales have been great. Um, but let's see what happens going in, but there are always going to slow down the winter months, so let's see what happens next spring, you know? Yeah, I always gauge it off of what kind of clothes is the RV dealer wearing now, if he's transitioning out of cargo shorts and a Hawaiian shirt to something a little less formal. Yeah. Then we got a problem. This is really interesting because it's, to me, I'm fascinated because traditionally I would say historically we, we tend to think in the automotive industry in a single kind of focus. It's like, oh, I gotta sell more cars. But what you're demonstrating here is, hey, there's a lot of factors that we have to consider that shape out the whole of this or the entirety of this picture. So I'm wondering in your experience now and even your experience that you, you gained prior to starting lot pop are there and he tried tested and proven processes that worked pre pandemic that are still working during this time. Yeah. You know, all of our stores, you know, experience that the two things that we focus on is gross and volume one is to increase your gross by selling more cars by their fresh, essentially, the cars were depreciating asset. They were appreciating here in the last couple months, but they'll go back to the a depreciating asset. So as soon as you get off of it the better. So you're grossest can go up by selling cars faster. Second one was, you know, carry what you sell. So we carry, you got 100 stock, sell hundreds. So during the pandemic last year I wasn't telling people dumps Karzai was saying, hey, you know, look at you two weeks, sale cycle times that by two. So if you sold 30 cars in two weeks last two weeks, you're on pace to sell 60 going forward. You know, if you stay on that pace, so keep your inventory levels there and, and, and as long as you stay clean like that. You know, I've always said, I'd rather miss a bubble meaning a lot of dealers, that guy that went out when everything shut down and went to lane and bought 100 cars. He might have been a winner and end up being, you know, the, the hero and all of a sudden, but I'd rather miss that bubble than get caught in it when it pops right. All said that, same if the market popped on him and he stuck with these 100 cars that just went down to rand volume. You know, that's the dealer, I don't want to be, I'll miss that bubble. You know that too little three month window and keep my inventory clean the rest of the year. So you know, you always want to carry. So you know, the two phases of pandemic one was that volume thing, the first phases dealers learned that they could sell 100 with only 70 in stock. They always thought that 150 to sell 100 all of a sudden they, they knew and they had the ability to do it. And a lot of them did it with short staff. The second phase was the gross all of a sudden these dealers are paying so much money for these cars, but yet they're gross profit has never been higher and one customers are willing to pay for it. I acknowledge that, but to the reason why is a lot of these dealers went from a 38, 30 day average age sold Down to 19 days old cars were selling faster...

...than they're getting them. So they're able to grab gross profit because they're selling them fast. And so that's always been our theory over there will be eight years in September here, knock on wood that we've always taught dealers carry yourself so what you carry. Um, and, and if you just stay clean, you can phase anything out, you can get through any of these phases, um, both in the, and we go back into recession, the shutdowns, if you just carry your cell rates, keep the inventory clean. Um, you know, and I do think here's the other thing, I think having a strict aging policy, you know, these dealers, you know, complaining about gross and volume, a lot of it had to do with, you know, I spent eight years with the inventory management tool, talking about market based price and a lot of them figured they can't make gross because of market based pricing and the guy down the street and everything else. The whole reason why I think dealers can't make grosses, they're their own worst enemies. And the fact that at least the dealers without an aging policy, Um, if everybody had a 60 day age policy were buying and selling it, current market volumes values and you, because if you actually look right now, if I start pricing cars, if I go look at the competitive set, I'm gonna look at cars that dealers have had for 100 and 100 and 20 days that there. So now I either have to compete with that dealer who doesn't have an age policy, let a car sit for 100 and 50 days now, it's finally dumping it. And if I compete with them, I'm losing money, I'm losing gross. So either got to compete with him or let him sell it and sit and wait until my price becomes relevant. Um, by then I'm the age guy and now I'm dumping the car. So if every dealer just had an aging policy, you know, that's where I think grosses go up. Yeah, that makes, that makes total sense. It's, it sounds, um, you start to get to like the hotel business. I've always wondered how the hotel business makes their money, but, but when you spell it out this way, it's kind of in the same, in the same token, it's never made sense to me that I've got a unit sitting here for 100 and 50 days or 160 days yet. I'm somehow trying to reconcile what did I pay for that, that unit? How much does it cost sitting on the lot? And now I have to compete against somebody who's just purchased a new river, you know, a younger version of this, this unit and now I'm competing on price when I, when I could be upside down. But having that, like you said, having that strict, um, age policy makes total sense to avoid that. Now, let me ask you this on the back of that where there have been so many shortages. I mean, have auctions still been relevant during this time or are there other creative measures that you could recommend for dealers who might have a shortage of inventory to acquire that inventory and then also, uh, filter it through an aged policy. Yeah. Um, yeah, actually auctions are obviously still a go to place for dealers to stock their inventory. There's plenty of them out there. There's plenty of cars running still. Um, it's just a matter if you're willing to pay the money. The biggest success dealers are having right now is private party acquisitions. You know the benefits of this whole covid thing. One is digital retailing. It's kind of forced dealers to do the digital retailing. Like the carbon is where customers can do everything online. A lot of dealers were tiptoeing in it about it, heard about it would want to try it but figured maybe next year and so they've been dragging their feet and it kind of forced them to get into it. And that that that was a benefit. I think a lot of dealers started doing it and seen a huge benefit. And that the second thing is private party acquisition, these carbons and the Carmax is of the world's always advertised buying customers cars and again dealers kind of dabbled in it. Um They kind of had a service maybe person, you know hitting up values of of cars coming through service or calling a few people on craigslist. But um the really successful dealers, you know um I know a couple of them, they're buying 100 off the street a month Retail. Herbal, you know, of 180 90 of them are retailers because they're not going to buy something that they can't retail. So um they're being really successful...

...at, there's products out there, there's tools to help make that better. Um you know one coming by like vin Q. Has a private party acquisition tool that allows you to shop easy. So dealers that can actually called a V. B. C. A vehicle buying, um, a center and having a vehicle buying center with reps that, that's their only job and then, and bonus in the custody of the staff for it. You know, some, some dealers just say, hey, we'll give you 100 or 200 bucks if you help us buy a car from your friend or a family or service. Well, these dealers had a successful paint up to $500 because it's still cheaper than transportation and auction fees. And so when it takes just as much work to call email, hunt the customer down, set an appointment, get him in praise the car as it does selling a car. Why wouldn't you commission it just as much. So how do you think that place and not, you know, with the success of that, Which is what you just said is exactly what I was thinking would be the case with, with private party acquisition. How do you see that factoring into this whole auction sphere where they're realizing holy crap, I don't have to pay by your fees and seller fees and all of transportation fees. Do you see a potential phasing out of auctions? Are, are, are you getting a hint that auctions are shifting their model moving into this new phase of the business? Yeah, they're shifting it. I mean, shoot, I think it was a desk that announced that they were not going to do any more physical auctions, but I think they backtracked out of that. But that was their goal, obviously it saves them a ton of money. Now the man Himes of the world are going to be stuck with a lot of real estate that, you know, if they decide to go virtual. I mean obviously still got to run the car service some photos and stuff, but do they need all that real estate to do that? Um, so the, yeah, I mean, you also have the things like the a cbs of the world's that allow dealer to dealer transactions and versus wholesale versus going to the lane, uh, more and more used car managers are getting used to buying online. So buying it online from a consumer from a CV or from other dealer dealer acquisition tools, uh, going to be more appealing up until those become the big guys and they start up in their fees more, you know, eventually right now they're staying cheaper than auction as a business proposal. But once that maybe fades away than the fees are going to be back to there. So I think dealers always gonna stay ahead of that curve. And, you know, buying straight from the consumer trades are easier to sell better gross profit, but less likely age to local cars, locally serviced has a better story to it than, you know, a rental car you got from Manheim pennsylvania, but you know, that's where dealers always just got to stay ahead. Um, but again, the auctions they got their relationships with the O. E. M. S and the rental car companies and the banks and stuff and they're gonna, they're gonna run their, their units through. You can't banks, not, again, maybe they do, I don't know, but a bank or O. E. M. They're not going to be listed. I would think on these dealer to dealer acquisition tools, so they're still going to need be a need for the wholesale lane. Yeah, it's interesting you brought up carbon as well in their process. I feel like there's always been two camps as far as these tech, these incumbent tech companies, right? So you got the carbon as the rooms. Canada drives like all of these different companies. Um, and the camp a has been, oh well, but it's their failing because they never posted profit. And then there's those that are choosing to be inspired by this whole model. Um, I just heard recently Carve Ana, this is the first year that they've actually posted a profit and it was like $45 million. And so what I think is interesting here is that they've been, you could look at them as having failed, but I think they have really just been investing to figure out what works and I've really pushed the envelope on, you know, shaping demand and consumer behavior and stuff like that. But trickling that down, I guess to the dealer level say I'm a...

...single point store. How many tools? You mentioned Vinke you, I mean, how many tools as of current if I'm a dealer owner, how many tools do you think I need to be looking at in order to pull off something similar? And for the most part, do I maybe already have them in my possession? Like does that make sense? Do I need 20 different things? Do I need a trade tool and inventory tool? The website or or is there may be a simplified way in your opinion that that I could go about this and really push the envelope for my store? Yeah, I mean there's probably a lot of the companies, dealers are already, you know, I don't I don't know how to answer that. Other than the fact that I believe a lot of dealers, vendors partners that they already have their website provider probably has some kind of digital retailing products that they can pay you back off of and don't have to get another company to do. I think first comes to mind something like dealer inspire. I know they do a lot of digital retailing plus provide a website and things like that. So, um, you probably currently have a vendors, you know, when I was in the retail and I was, but this is back in the nineties when I was running internet departments, I was frustrated cause I had my website had my Syria and I had, even though I had a website had to buy an appraisal tool, which a lot of dealers still have to do that, you know, separate appraisal tool, a separate, you know, information, you know to give reviews and stuff and Windows. So it was just had five different people just to run my one website and it's gotten a little bit better since. But then people complain about the monopolies, you know, like the cox of the world where everything, you know, cox is providing that they give you everything you need, you got the wholesale, you got the retail price, you got this and you've got that and then a lot of people hate, you know, the monopolies of some of those companies, but um, you know, I think there's plenty of Companies dealers should already dealing with. But yeah, I mean there's just a lot of tools, you got to put it all together between the digital retailing tool that you know, the credit apps and then the desk in tools and so forth. But I think it really comes down to just how you communicate to the customers and how you make it efficient. I literally had and I've obviously been in the business 20 plus years and I had a, had a honda lease. Now I was turning in in a little bit early but I knew I had equity situation to do that at least another one and that new least I was going in was a three or 12,000. So it was going to be under warranty the whole time I owned it and it literally took three hours one day to get just the car picked out. That was half of that was us kicking tires, looking at what we wanted one is from my daughter, but the other half was going back and forth and the payment and the down payment and the, you know, then once we figured that was all done, my kids were already hungry. They're tired. So we decided to schedule delivery for another day. Well that, that delivery time I think was five or 5 30 so we didn't eat prior to that dragging my kids there again. Thinking we've already negotiated everything. It's a, you know, three or 36. I can be in and out when you go get dinner, not drag on for three more hours. I mean you're talking six hours and this should be an easy transaction and communication and all that. So it's not so much the tool is just what are you doing to make this easier for the customers both in communications and, and then yeah, it was just a mess. And, and I think that's the obstacles dealers have to overcome because you're the biggest promotion a dealer has over the Koran news of the world is the people, you've got people, you've got staff, you got people, your kids may know or your, there's a neighbor that's a salesman that you know, that was referred and there's that people like to buy from people they like and know and trust and you know, just to buy it off a computer, there's, you know, who's going to answer your questions for things like that And so, but when those people drag your feet take too much time trying to, you know, that's, that's, that's the focus dealers need to, to really, it comes down to the people. Yeah, I love that in the process and more than the products. Yeah, I love that. And I want to just...

...touch now on the, on the process piece. So you've mentioned having an aging policy, Are there any other processes like when you go into a store, when you do your 20 groups or your training through your university or things of that nature? What are maybe some of the top most common broken processes aside because we've already talked about aging policy. What are some of the other ones that you would recommend dealers pay attention to that they need to avoid and or fix immediately. Um, again, we focused on increasing the amount of cars to sell in the 1st 30 days. But in order to do that, what we found was the Keeley Steele was turnaround time. Um, if time is of essence and one of the things I had to struggle to get dealers understand it. So it's amazing that a lot of dealers don't really look at and consider holding cost, how much per day does it cost for car to sit on in the slot And it's upwards of 35-75 or more per day. Um, some dealers are paying 100 a day for that car to sit in one slot per day and so let's just round it down, the $50 meet in the middle there at $50 times four days of that car not getting through service, it's $200 expense. Now one way I figured to overcome that with dealers just get them to understand is forget about having 100 slots on your lot because you got 99 other ways to make money then this one car taking too long. Let's just imagine you have one slot, you have one slot to sell a car to make enough money to make your payroll, your rent your more, you know, everything that you need to do and if that one slot sits empty too long the extra day or two or you let a car sit there for 100 days and you don't sell it. So you don't get any f and I, you don't get trade, you don't get nothing. Um You know to me, if you just focus on that one slot um, and act like that is the only slot and the only car you have to sell to make money then I think they start treating it a little bit differently. And um, so yeah, it's the turnaround time is the achilles heel of everybody because if you take 15, 20 days to get a car finally through, then you're already halfway through more than halfway through the sale cycle that it should be. And you're not gonna want to get aggressive enough to move it. You know, by the time it's 21 days old, you should be positioned here to really start, you know, maybe asked for extra money in the first week or two. But by the time it's 21 days start getting realistic by day 30 getting off of it. If you have a 30 day 60 day age policy when we've gone on average, 30 days, it's taken too long. You're gonna drag that on and you're just going to continue to bleed through an aging. You know, and you might not have an aging problem because you, you blow it out by day 45 or 50 or day 60 because you have an agent policy but not maximizing gross and, and this, this makes me think about how long it actually takes to merchandise that unit because sometimes we know they come in and then we drag our heels on taking photos, maybe reconditioning like all of that kind of stuff. And so it's just sitting there and then what happens on the website is you get a piece of inventory sitting there with no photos with, with nothing because we think that that's going to do something and so now we're not merchandising properly plus compounded on top of it, just sitting in the slot for, for way too long. Um yeah, that, that's actually really interesting. I've never, I've never thought about it in those terms to that degree. Um man, there's so many other questions that I don't want to ask you. I mean obviously you have a podcast with people that that are really interested in diving into your brain at a deeper level. Can can hear you on the lot pop uh podcast. How else can those listening get in touch with you? Facebook, You know, I tried at least once a week put out that um kind of a, what I call a lot party tip and you know what, what you can do to, you know, a lot of dealers call a lot party when they stir things up, move cars around. So you know, try to throw something out there once a week, which ends up on my podcast. That's essentially what the...

...podcast is, is taking that recording and and putting it out there for for dealers and again, it's just give them some insight on current market trends and stuff to what we're seeing, what's happening? So Jason rice, but the Jason is with an e eaten, I have one floating out there with an O. N. That looks just like me because it is me, but it was an old account that I can't get closed anyway. I keep Messaging probably. Um I had somebody else message and I'm like, Hey, wrong account. Um but yeah, and you know, mostly I put that stuff there, but YouTube, you know all that, all my tips are on videos that end up on YouTube. Subscribe there 250 plus for four or five years now. Video content out there mostly wrapped around Usucar management sometime. Internet process management. Um of course lengthen and that stuff will go there. Amazing man. Thank you. Thank you. Thank you so much for joining me here on the dealer playbook podcast. Thank you for having me again. I'm Michel Cirillo and you've been listening to the dealer Playbook podcast. If you haven't yet, please click the subscribe button wherever you're listening right now. Leave a rating or review and share it with a colleague. Thanks for listening. Yeah. Mhm. Mhm.

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