The Dealer Playbook
The Dealer Playbook

Episode · 4 months ago

Jasen Rice: Improve Your Used Vehicle Process


Jasen Rice is the founder of, 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:



Connect with Michael Cirillo:





...the car business is rapidly changingand modern car dealers are meeting the demand. I'm Michael Cirillo andtogether we're going to explore what it takes to create a thriving dealershipand life in the retail automotive industry join me each week forinspiring conversations with subject matter experts that are designed tohelp you grow. This is the dealer playbook. Yeah, Well I've been looking forward to thereturn of my guest today since the last time we spoke on the podcast. He's thepresident and Ceo of Lot Pop, an automotive tech company and consultancythat is helping dealers keep a pulse on what's happening in the market and howto adjust inventory related processes to meet the demands. Jason Rice,welcome to the dealer playbook podcast. Hey, thanks for having me. Thanks forhaving me back actually. Yeah, Well, I mean it's, I felt it appropriatebecause I mean the last time we spoke, uh, you shared how used vehicleinventory would really be the saving grace through the pandemic and by andlarge, that's exactly what happened. That that was absolutely true. And Ithink it's still true. Even at, at the time of recording this. Uh, and I meanthinking about what's happening currently for all of those that care toknow what happens in the year 2045, there's chip shortages. I mean there'sjust a whole slew of things going on that are preventing new vehicles inparticular from shipping to dealerships. Um, I guess my first question isinterestingly enough, Jason, I just finished another call. I had aconversation with someone about how business is a lot like chess and I knowthat you like to look forward similar to a chess game you like to lookforward. And I've really built a name on looking forward um Several stepsahead. What do you think The name of the game will be for inventorymerchandising or management moving into the next 3-5 years on the back ofeverything that we've experienced, sure we'll want to you know yeah being achess player that's actually one of our core values as a company always bethinking uh five moves ahead. But um you know and that's the other thing notto toot my own horn but you know the other thing at last april I put my backout there. We might have talked about it about C. P. O. Having uh being oneof the winners coming out of this and they just had another record I think 12or 15% increase in CPO sales. So you know you just know that new cars isgoing to be a struggle. I will continue to be a struggle. So you know one ofthe things that I'm looking forward to talk about years down the road couplecouple of years I have is especially even the new cars because they take thebiggest hit is all these customers buying them well above sticker you knowon some of these cars so how are they going to be able to get out of thesethings? 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'ssee what april or october and november brings when it comes to, you know, dothese read rental car companies, you know, they're the ones that went to thelane, drove up all these values because they can, they can pay five grand overasking price or mm are just because they'll make up the difference andrenting the car out and they're very successful at that. If you have a renta car lately and, and the fees they are charging. So will they as vacationstops as this new delta things start spreading this travel, start going backdown and they start letting some of these cars go while the wholesale stillhigh. So that's one of my immediate concern because anything that dealersbuying right now is going to be aged in october and going into november. So ifthey start dumping cars both for a strategic standpoint of getting as muchmoney as they can before the, if before the market, if it drops one and thentwo for business, you know, tax write off for any losses for that year. Um,so that could be a benefit for them to... that. If they do, somebody commentedwhen I made that comment and said, why would they, if they're not going to geta new new supply? So, well, well next year, if they need to buy more, they'lldo what they did this year, stand at the lane and pay too much money for himand overcharge it for, for rental fees. So to me that it would be my nearestconcern coming forward. But yeah, 23 years down the pipe and these peopleare trying to trade these cars in. What are the values gonna be, what's themarket going to look like? And if it's any, if it goes back to any kind ofnormal market, they're going to take some big hits. Um, and so how dodealers get out of it? You know, the, the domestics might win that battle andI say that because they tend to have higher rebates, 358 grand, 10 grandrebates. I've seen at one point in time on some cars and those type of rebatesmight help some of these people get unburied where, you know, the Hondasand the Toyotas of the world's don't really run too big of incentives. Sothat might be a big shift. Um, you know, if, if they might have to gain somemarket share there. But yeah, that's my biggest concern is dealers being ableto get these people out of these cars. Um, if they try to tear them in andthen, I mean, yeah, and as you're saying all of this, it makes perfectsense. I'm taking these notes and I'm thinking the far reaching impact is ondealer, but it is also on consumer and then what is the impact on credit gonnabe, 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 peopleout of these, these units, consumers, credit scores perhaps might might notbe very good. And so you're gonna have, do you see maybe a surgeon in thesubprime market? Yeah. Well, it depends. I mean, if it's a, if it's a decentcustomer, I think banks will have some kind of leniency on, okay. Weunderstand that two years ago you were, you know, for two months, you ran intoa covid situation, you've straightened yourself out since. So there might besome of those, um, you know, the biggest thing is, will people get backto where the government pulled the money away from people that aren'tworking 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 theystill just try to stay at home and that's when they start going past dueon their bills. Are they actually going to start getting jobs and will the jobsto be there? You know, you go into this again, this stupid masked andgovernment mandates and stuff when they start seeing things down. And then, sowhen the government pulls money, you know, it could be bad time and theypull money and then all of a sudden they shut down, they got to reopen itsgonna be a confusing party, whoever knows, But you know, I'm liking theprospect of the fact that I don't think they'll shut things back down. I thinkthat 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. AndI think that stimulates the economy keeps that here, people in the creditsituation, the housing market something to be scared about that affectedobviously the 08 recession, which a lot of dealers had to deal with and lost alot of sales that way is the housing market crunch. Um So you know, Istarted seeing that foreclosure, but I think the government extended thosethings out to where they can't, you know, start yanking houses out fromunderneath people. So um whenever that happens, which I don't know if it willhere in the near future with this new covid variant coming out there um thatwe have to worry about that, I think credit should be okay or at least umenough 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 thatright now. So yeah, that makes total sense. Now, side note, do you see, haveyou seen historically, where when housing is kind of unaffordable, thatvehicle 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, theydon'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 bigstuff, it's the daily stuff, their gas, you know, goes up from, I mean shoot, Iwas just noticing this over three bucks a gallon now and I remember when I gotthe four right? And so you know those are the tight skirt and then buyinggroceries all of a sudden you got to spend 100 extra bucks a month andgroceries, another 100 bucks, two bucks a month And gas or something, thenthere goes my, my new car, you know that $200 extra I was going to spend ona car, new car payment went out the window. So that's more what I'm afraidof them. You know the housing stuff, you know, you're just gonna watch thehousing market if that starts crashing, that's a trickle down effect for a lotof places. One of the things keep an eye what I've always heard and I don'tknow if it's true as far as patterns is and when it comes to the economy andstuff 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 ifthey are doing good, um, you know, RV sales have been great. Um, but let'ssee what happens going in, but there are always going to slow down thewinter months, so let's see what happens next spring, you know? Yeah, Ialways 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 tosomething a little less formal. Yeah. Then we got a problem. This is reallyinteresting because it's, to me, I'm fascinated because traditionally I would say historicallywe, 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 thewhole of this or the entirety of this picture. So I'm wondering in yourexperience now and even your experience that you, you gained prior to startinglot pop are there and he tried tested and proven processes that worked prepandemic that are still working during this time. Yeah. You know, all of ourstores, you know, experience that the two things that we focus on is grossand volume one is to increase your gross by selling more cars by theirfresh, essentially, the cars were depreciating asset. They wereappreciating here in the last couple months, but they'll go back to the adepreciating asset. So as soon as you get off of it the better. So you'regrossest can go up by selling cars faster. Second one was, you know, carrywhat you sell. So we carry, you got 100 stock, sell hundreds. So during thepandemic 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 sold30 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'drather miss a bubble meaning a lot of dealers, that guy that went out wheneverything shut down and went to lane and bought 100 cars. He might have beena winner and end up being, you know, the, the hero and all of a sudden, butI'd rather miss that bubble than get caught in it when it pops right. Allsaid that, same if the market popped on him and he stuck with these 100 carsthat just went down to rand volume. You know, that's the dealer, I don't wantto be, I'll miss that bubble. You know that too little three month window andkeep my inventory clean the rest of the year. So you know, you always want tocarry. So you know, the two phases of pandemic one was that volume thing, thefirst 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 andthey 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 muchmoney for these cars, but yet they're gross profit has never been higher andone customers are willing to pay for it. I acknowledge that, but to the reasonwhy is a lot of these dealers went from a 38, 30 day average age sold Down to19 days old cars were selling faster...

...than they're getting them. So they'reable to grab gross profit because they're selling them fast. And sothat's always been our theory over there will be eight years in Septemberhere, knock on wood that we've always taught dealers carry yourself so whatyou 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 intorecession, the shutdowns, if you just carry your cell rates, keep theinventory clean. Um, you know, and I do think here's the other thing, I thinkhaving a strict aging policy, you know, these dealers, you know, complainingabout gross and volume, a lot of it had to do with, you know, I spent eightyears with the inventory management tool, talking about market based priceand a lot of them figured they can't make gross because of market basedpricing and the guy down the street and everything else. The whole reason why Ithink dealers can't make grosses, they're their own worst enemies. Andthe fact that at least the dealers without an aging policy, Um, ifeverybody had a 60 day age policy were buying and selling it, current marketvolumes values and you, because if you actually look right now, if I startpricing cars, if I go look at the competitive set, I'm gonna look at carsthat dealers have had for 100 and 100 and 20 days that there. So now I eitherhave to compete with that dealer who doesn't have an age policy, let a carsit for 100 and 50 days now, it's finally dumping it. And if I competewith them, I'm losing money, I'm losing gross. So either got to compete withhim or let him sell it and sit and wait until my price becomes relevant. Um, bythen I'm the age guy and now I'm dumping the car. So if every dealerjust had an aging policy, you know, that's where I think grosses go up. Yeah, that makes, that makes totalsense. It's, it sounds, um, you start to get to like the hotelbusiness. 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 sametoken, it's never made sense to me that I've got a unit sitting here for 100and 50 days or 160 days yet. I'm somehow trying to reconcile what did Ipay for that, that unit? How much does it cost sitting on the lot? And now Ihave to compete against somebody who's just purchased a new river, you know, ayounger version of this, this unit and now I'm competing on price when I, whenI 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 theback of that where there have been so many shortages. I mean, have auctions still beenrelevant during this time or are there other creative measures that you couldrecommend for dealers who might have a shortage of inventory to acquire thatinventory 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 theirinventory. There's plenty of them out there. There's plenty of cars runningstill. Um, it's just a matter if you're willing to pay the money. The biggestsuccess dealers are having right now is private party acquisitions. You knowthe benefits of this whole covid thing. One is digital retailing. It's kind offorced dealers to do the digital retailing. Like the carbon is wherecustomers can do everything online. A lot of dealers were tiptoeing in itabout it, heard about it would want to try it but figured maybe next year andso 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 itand seen a huge benefit. And that the second thing is private partyacquisition, these carbons and the Carmax is of the world's alwaysadvertised buying customers cars and again dealers kind of dabbled in it. UmThey kind of had a service maybe person, you know hitting up values of of carscoming through service or calling a few people on craigslist. But um the reallysuccessful dealers, you know um I know a couple of them, they're buying 100off the street a month Retail. Herbal, you know, of 180 90 of them areretailers because they're not going to buy something that they can't retail.So um they're being really successful..., there's products out there, there'stools to help make that better. Um you know one coming by like vin Q. Has aprivate party acquisition tool that allows you to shop easy. So dealersthat can actually called a V. B. C. A vehicle buying, um, a center and havinga vehicle buying center with reps that, that's their only job and then, andbonus in the custody of the staff for it. You know, some, some dealers justsay, hey, we'll give you 100 or 200 bucks if you help us buy a car fromyour friend or a family or service. Well, these dealers had a successfulpaint up to $500 because it's still cheaper than transportation and auctionfees. And so when it takes just as much work to call email, hunt the customerdown, 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 placeand not, you know, with the success of that, Which is what you just said isexactly what I was thinking would be the case with, with private partyacquisition. How do you see that factoring into this whole auctionsphere where they're realizing holy crap, I don't have to pay by your feesand seller fees and all of transportation fees. Do you see apotential phasing out of auctions? Are, are, are you getting a hint thatauctions are shifting their model moving into this new phase of thebusiness? Yeah, they're shifting it. I mean, shoot, I think it was a desk thatannounced that they were not going to do any more physical auctions, but Ithink they backtracked out of that. But that was their goal, obviously it savesthem a ton of money. Now the man Himes of the world are going to be stuck witha lot of real estate that, you know, if they decide to go virtual. I meanobviously still got to run the car service some photos and stuff, but dothey need all that real estate to do that? Um, so the, yeah, I mean, youalso have the things like the a cbs of the world's that allow dealer to dealertransactions and versus wholesale versus going to the lane, uh, more andmore used car managers are getting used to buying online. So buying it onlinefrom 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 theystart up in their fees more, you know, eventually right now they're stayingcheaper than auction as a business proposal. But once that maybe fadesaway than the fees are going to be back to there. So I think dealers alwaysgonna stay ahead of that curve. And, you know, buying straight from theconsumer trades are easier to sell better gross profit, but less likelyage to local cars, locally serviced has a better story to it than, you know, arental car you got from Manheim pennsylvania, but you know, that'swhere dealers always just got to stay ahead. Um, but again, the auctions theygot their relationships with the O. E. M. S and the rental car companies andthe banks and stuff and they're gonna, they're gonna run their, their unitsthrough. You can't banks, not, again, maybe they do, I don't know, but a bankor O. E. M. They're not going to be listed. I would think on these dealerto dealer acquisition tools, so they're still going to need be a need for thewholesale lane. Yeah, it's interesting you brought up carbon as well in theirprocess. 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 ahas been, oh well, but it's their failing because they never postedprofit. And then there's those that are choosing to be inspired by this wholemodel. Um, I just heard recently Carve Ana, this is the first year thatthey've actually posted a profit and it was like $45 million. And so what Ithink is interesting here is that they've been, you could look at them ashaving failed, but I think they have really just been investing to figureout what works and I've really pushed the envelope on, you know, shapingdemand and consumer behavior and stuff like that. But trickling that down, Iguess 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 doyou 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 tradetool and inventory tool? The website or or is there may be a simplified way inyour opinion that that I could go about this and really push the envelope formy store? Yeah, I mean there's probably a lot ofthe companies, dealers are already, you know, I don't I don't know how toanswer that. Other than the fact that I believe a lot of dealers, vendorspartners that they already have their website provider probably has some kindof digital retailing products that they can pay you back off of and don't haveto get another company to do. I think first comes to mind something likedealer inspire. I know they do a lot of digital retailing plus provide awebsite 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 ninetieswhen I was running internet departments, I was frustrated cause I had my websitehad my Syria and I had, even though I had a website had to buy an appraisaltool, which a lot of dealers still have to do that, you know, separateappraisal tool, a separate, you know, information, you know to give reviewsand stuff and Windows. So it was just had five different people just to runmy one website and it's gotten a little bit better since. But then peoplecomplain about the monopolies, you know, like the cox of the world whereeverything, 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'vegot that and then a lot of people hate, you know, the monopolies of some ofthose companies, but um, you know, I think there's plenty of Companiesdealers should already dealing with. But yeah, I mean there's just a lot oftools, you got to put it all together between the digital retailing tool thatyou know, the credit apps and then the desk in tools and so forth. But I thinkit really comes down to just how you communicate to the customers and howyou make it efficient. I literally had and I've obviously been in the business20 plus years and I had a, had a honda lease. Now I was turning in in a littlebit early but I knew I had equity situation to do that at least anotherone and that new least I was going in was a three or 12,000. So it was goingto be under warranty the whole time I owned it and it literally took threehours one day to get just the car picked out. That was half of that wasus kicking tires, looking at what we wanted one is from my daughter, but theother half was going back and forth and the payment and the down payment andthe, you know, then once we figured that was all done, my kids were alreadyhungry. They're tired. So we decided to schedule delivery for another day. Wellthat, that delivery time I think was five or 5 30 so we didn't eat prior tothat dragging my kids there again. Thinking we've already negotiatedeverything. It's a, you know, three or 36. I can be in and out when you go getdinner, not drag on for three more hours. I mean you're talking six hoursand this should be an easy transaction and communication and all that. So it'snot so much the tool is just what are you doing to make this easier for thecustomers 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'rethe biggest promotion a dealer has over the Koran news of the world is thepeople, you've got people, you've got staff, you got people, your kids mayknow or your, there's a neighbor that's a salesman that you know, that wasreferred and there's that people like to buy from people they like and knowand 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 whenthose 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 thepeople. 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 processeslike when you go into a store, when you do your 20 groups or your trainingthrough your university or things of that nature? What are maybe some of thetop most common broken processes aside because we've already talked aboutaging policy. What are some of the other ones that you would recommenddealers pay attention to that they need to avoid and or fix immediately. Um, again, we focused on increasing theamount of cars to sell in the 1st 30 days. But in order to do that, what wefound was the Keeley Steele was turnaround time. Um, if time is ofessence 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 considerholding cost, how much per day does it cost for car to sit on in the slot Andit's upwards of 35-75 or more per day. Um, some dealers are paying 100 a dayfor 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 gettingthrough service, it's $200 expense. Now one way I figured to overcome that withdealers just get them to understand is forget about having 100 slots on yourlot because you got 99 other ways to make money then this one car taking toolong. Let's just imagine you have one slot, you have one slot to sell a carto 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 theextra day or two or you let a car sit there for 100 days and you don't sellit. 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 isthe only slot and the only car you have to sell to make money then I think theystart treating it a little bit differently. And um, so yeah, it's theturnaround time is the achilles heel of everybody because if you take 15, 20days to get a car finally through, then you're already halfway through morethan halfway through the sale cycle that it should be. And you're not gonnawant to get aggressive enough to move it. You know, by the time it's 21 daysold, you should be positioned here to really start, you know, maybe asked forextra money in the first week or two. But by the time it's 21 days startgetting realistic by day 30 getting off of it. If you have a 30 day 60 day agepolicy when we've gone on average, 30 days, it's taken too long. You're gonnadrag that on and you're just going to continue to bleed through an aging. Youknow, and you might not have an aging problem because you, you blow it out byday 45 or 50 or day 60 because you have an agent policy but not maximizinggross and, and this, this makes me think about how long it actually takesto merchandise that unit because sometimes we know they come in and thenwe drag our heels on taking photos, maybe reconditioning like all of thatkind of stuff. And so it's just sitting there and then what happens on thewebsite is you get a piece of inventory sitting there with no photos with, withnothing because we think that that's going to do something and so now we'renot merchandising properly plus compounded on top of it, just sittingin the slot for, for way too long. Um yeah, that, that's actually reallyinteresting. I've never, I've never thought about it in those terms to thatdegree. 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 reallyinterested in diving into your brain at a deeper level. Can can hear you on thelot 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 mypodcast. That's essentially what the...

...podcast is, is taking that recordingand and putting it out there for for dealers and again, it's just give themsome insight on current market trends and stuff to what we're seeing, what'shappening? So Jason rice, but the Jason is with an e eaten, I have one floatingout there with an O. N. That looks just like me because it is me, but it was anold account that I can't get closed anyway. I keep Messaging probably. Um Ihad somebody else message and I'm like, Hey, wrong account. Um but yeah, andyou know, mostly I put that stuff there, but YouTube, you know all that, all mytips are on videos that end up on YouTube. Subscribe there 250 plus forfour or five years now. Video content out there mostly wrapped around Usucarmanagement sometime. Internet process management. Um of course lengthen andthat stuff will go there. Amazing man. Thank you. Thank you. Thank you so muchfor joining me here on the dealer playbook podcast. Thank you for havingme again. I'm Michel Cirillo and you've beenlistening to the dealer Playbook podcast. If you haven't yet, pleaseclick the subscribe button wherever you're listening right now. Leave arating or review and share it with a colleague. Thanks for listening. Yeah. Mhm. Mhm.

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