#287 - Reconditioning - Housekeeping Series

You are listening to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson.

Hello, and welcome to the Independent Dealer Podcast brought to you by Buckeye Dealership Consulting. Luke. We are back at it, continuing our housekeeping series, and I. Dude, I'll tell you what, man. I enjoy nothing more than decluttering, man, I love, like, I love this housekeeping stuff, man. Like, I get so much joy out of throwing stuff away.

Yeah. Uncluttering your brains. It's a, you know, a tip as well. You got to do that. You gotta do that every once in a while. But I'll tell you, I. I'm with you, Jeff. I love to throw things away, and my wife does not. So she's gonna probably listen. She's gonna probably listen to this, and she's probably gonna not talk to me for a couple hours, but that's the way it goes. I like to throw things away. I like to get the house back in order, the shop back in order, and that's what we're doing right now. We're trying to. We're trying to prod dealers into, hey, let's look at the whole business again. And these are really simple tips that'll help you kind of maybe fix your processes just a little bit and get back on track.

Yeah. So this week, Luke, let's tackle the reconditioning part of it. Right? So it's a broad, broad topic, so we don't want to get into too much of it, but let's just talk a couple tips, ideas that dealers can put into their recon process. Right. I'm talking about from the time the car hits the lot, you know, gets dropped off by your transporter. You know, what are some tips and ideas we can implement or be aware of as we tighten up that process? Because I know you preach time to line all the time. Right. And within that, I mean, there's a million, million moving pieces, but getting that car off the trailer through your recon process and to the front line, that's money. That's money in your pocket.

I'm. I'm going to give you the number one hack, the way around everything. And that is the first thing you should do. If you're a big enough operation. Some of you out there may not be, but you need to hire somebody that I call an internal inventory manager. It's. I am. And that person, it is their job to make sure that car gets to line and the pictures are online and all that. So the number one thing is you have to put somebody in charge of this process. Um, and I don't know, you probably need to sell 30 car, 25 to 30 cars a month before you start doing this. Probably before that it's just you. But if you do not have somebody in charge of it, let me tell you what happens. Nobody gets it done. So you gotta have one person in charge.

Yeah, yeah. And you're talking about one person that's basically in charge of all of your inventory. Right. So he's maybe not the buyer. Could be the buyer, maybe not the buyer. Is this a full time job for you for this?

Yeah, 100 and. And we sell about 40 cars a month. And so they, their full time job is when I buy the car and it's put on the truck, I'm out of it. And so from the time that car is put on the truck till it is forward fully recon, including detail body. And he's in charge of the website as well. So he, he's in charge of getting cars, pictures for the website priced everything. So it is enough time for 40 cars a month for one person to handle that. And he handles wholesale stuff and things like that too. So he is in charge of internal cars. And that also means making sure every car has gas and it makes sure every car on the lot is cranked properly and make sure that it check engine lights not on. If something fails while the car is on the lot, he's got to go back in and recon again. So. And he's also in charge of if there's a policy issue with the car, it has to be run by him to make sure that this is something we decided not to fix, you know, or whatever. So it's a lot going on with. And that's just 40 cars a month you're doing know if you're probably doing 60 to 80 cars a month, you probably need that person and an assistant, maybe two assistants. Because this is a, it's a lot going on guys. I mean there's a, there's a lot to do to get a car ready.

Yeah. So a couple of tips I would say is, you know, at our place we have a goal of a 24 hour inspection. Right. So from the time that car hits the lot, our goal is that we've run it through our 50 point inspection. We have a formal for us it's just a piece of paper, but on it it has 50 plus points that are a mechanic, the same guy every single time. And he's one of our best mechanics. He goes through that checklist within 24 hours of that Car hitting our location, we want to know what's going on. Right. Because by the time that car gets here, the clock's ticking. Right. Whether it's got some arbitration window or whatever the situation is, you need to know quickly, hey, is this thing the way it's supposed to be? Is there something on here that needs to be arbitrated through one of the auction platforms, or do I just need to flip this thing around and send it right back down to the auction? You know, but that inspection process is crucial that it's done quickly and then it's done consistently by the same person who really knows what they're doing.

Yeah. And so what you brought up are goals and expectations. You have to have an expectations of your recon process. Our initial goal is three pictures on the website in the first 24 hours. And what we call our F1 process is what you just described has to be done within 48 hours of that car landing. And our goal is to have that car through F2, which is the full, full mechanical recon, within 48 hours of the initial inspection. So time is very sensitive here that, you know, what will happen is when you start tracking all these things, you'll find out where your bottlenecks are. Right. But there's so many. This initial inspection is so important. You know, we recon our cars to a higher level than. Than most buy here, pay here. So our initial inspection, we. We do everything digital. You don't have to do everything digital, but we do. We use our service software, allows us to take pictures of different things. So we have a real idea of, hey, the initial, initial walk around. It's kind of like a customer pay walk around. Hey, does any body work? Does need interior work? All these things, we take pictures of it, and then if there is a question, they can say, hey, look at this loop. Do we want to fix this or not? So all these things have to be. The inspections have to be written down, what you talked about digital or written down. But every. Every inspection has to be followed exactly the same way every time.

Yeah. When this is a good time, guys, to throw in our plug for Buckeye. As you guys know, they're a great sponsor of the podcast. Last week, we talked about the moves they're making with the Berkshire Group. They have the processes, right? And it's about consistency and it's about, you know, for them, it's selling the warranty every single time. Right. Selling the aftermarket products every single time. So very similar to your recom process. You've got to have Consistency, there's got to be a process. And this process, like I like to talk about, is set by you, the manager. Right. So when we talk about these recon processes, Luke, and you're saying, hey, you know, this is the standard of recon. And I know, Luke, you have a very high standard with physical stuff, right? I do not. I, I'm okay with density, scratches, torn seeds, whatever, but I have a very high standard with mechanical and safety issues. Right.

Yeah.

This is something I have to continue to help my service riders and even my mechanics see, like, hey, you know, when you're doing the inspection, it's okay. Like, I want you to advise that this is an issue. I want you to advise that maybe this is scratch, dented, whatever. But that doesn't mean we're going to fix it, right? That doesn't mean we're going to replace it. And this thing's going to hit the front line with five or six little knickknacky, you know, trim, accessory issues. But the salesmen are going to know, hey, man, you got to sell around those. We ain't going to fix that sunroof. We do not fix sunroofs. That's our policy. Sorry.

We fix them every day. But do. Another product that Buckeye offers is psi. If you're out there getting post sale inspections and paying Cox or a desert or whoever that 175A car or 155A car, just reassure yourself. Because what I like to say is if I bought a VIN and that car needs an engine, I'm going to put an engine in because I'm buying the car, I'm not buying whatever. And using Buckeye, you know, mechanical warranties on the back end or RPC up front really is a good way to help your recon process get even better. Because, you know, if I buy a car with a bad transmission, I put a new transmission. I know that transmission is going to last for a long time. So when I do sell a service contract or I give a warranty, I don't even have to worry about it. Jeff.

Yeah, yeah, it's a good point. For some of these cars where it's like, hey, you look back at your service records and you say, hey, this is actually the second transmission we put in this thing. We did one two years ago when we got it. And because we used a used one that had a ton of miles, now we're doing a second one a little bit later on. Yeah, there's definitely something to be said about that quality of your recon process. Nine times out of 10 though, my customer, it's probably either totaled out or lost to that second transmission. So.

Well, make sure, make sure you have CPI on your cars as well. Right? Yeah.

The other thing that we talk about is also, you know, along that of controlling the quality is the random audits. Right. I think as owners, you'll be surprised to go out there, you know, grab, grab an inspection before it gets to the part section, right. Like, hey, he just barely finished this inspection. I'm going to go re, inspect it, right. I'm going to look at everything that he said, pass, fail. I'm going to look at maybe a built out ticket and what parts were ordering. I know there was a time in my shop where like we were doing, we were doing wiper blades and air filters on every single car. Every car needed wiper blades, quote unquote. And every car needed a cabin air filter or an engine air filter. Guess why, Luke?

Because mechanics like doing that.

It's really because they flat a half hour. Every single one of them flat a half hour. Right. And so they could pad in an hour to two hours on every single ticket for something that took them 10 minutes.

Random audits are so important. So with my internal inventory manager weekly we go over recon tickets and, and I'll start pointing things out and this is something that we, we just started doing. And you will find that lower ball joints are called a ton of times and lower ball joints is not a cheap fix. Struts are called a lot. This is not a cheap fix. And what you, what happens is you, you hire technicians that come from Midas or, or Christian Brothers or places like this where they're taught to sell, sell, sell, sell, right? That's how they make money. And so it's a difference between a worn ball joint and a bad ball joint or one strut and a bad strut. And so you need to audit these tickets. You need to audit the inspections before the tickets sometimes to make sure that you are taking recon cost down is, it's a fine line, so don't get me wrong here, but your recon cost should be as cheap as possible with the best, best product produced. And so what you have to look at sometimes you go, okay, if my recon is too low, does my policy or warranty expense go up a lot? So you, what you need to make sure you're doing is backing that recon down as far as you possibly can get it. So let's say you're averaging 1200 a car. So what we should say is, okay, we're going to make it 900 a car. And at $1200 a car, our policy expense was $152 a sold unit. But if you push it to $900 so you're saving 300 on the front end, maybe your policy expense only goes up $50 a car. So it goes up to 202 a car. And so if that happens, you're actually saving yourself 250 per car sold. So these are things that you really need to make sure you're auditing and drive the cars after. After they do it as well. It's another way to audit to make sure that you're getting the product that you want to consistently sell your customer.

Yeah, real quick, Luke, I want to talk about that, but I also want a good time to throw in a plug for Primal end. When we talk about recon and we talk about the expense side of it, it is money intensive, right? It takes a lot. I think at any one time I might have, you know, a hundred or two hundred thousand dollars in just parts. You know, I've got my inventory, which I base around 800, and then I probably have another 100 to 200 in recon parts that are just sitting on my car. So it, it's expensive, man. Reconning twelve hundred dollars times forty dollars a car. Right. Or twelve hundred times forty cars. You know, that adds up pretty quick every single month.

It does. And if you don't have the cash to recon your cars, which, how many, how many dealers out there are selling inferior products because they didn't recon them properly? And a lot of people don't take that in consideration. When you buy 40 cars at the auction, you're going to spend another 1200 on them or 1500 on them. That adds up. And you do have to have a company like Primal in behind you to make sure that you get this, get the recon done properly and probably. And they've been around so long, they could probably help teach you how to recon a car properly. That's how, that's how good these guys are. So make sure that if you're, if you need a partner in your business when it comes to loan money, you choose the right one. And Primal and is definitely those folks.

Yeah. What I like, Luke, is what you said earlier is about the, you know, kind of the checks and balances in your shop, right? So when you talk about your recon process, you need to have the one guy that's the quality control, right? Your internal inventory manager who's really, really trying to put out a good product and you got to have the other guy who's really trying to balance out expenses. Right. And maybe, you know, your mechanics are, you know, obviously, you know, paid on hourly and maybe they're bonused on flat or maybe they're just paid straight flat. They're going to be pushing for those little jobs, right. Those little extra bread and butters. But then you need to have a parts manager or a service writer who's incentivized the other way around. Right. So there's always kind of a checks and balance within the shop of, you know, a quality product at a good price. And I really do like, I like holding back on recon a little bit, knowing that I'm going to spend it on goodwill because guess what? It buys me goodwill. I'm going to do the fricking goodwill repair anyways. Right. And I'd rather have five things on a car and do two of them, then only have two things left on a car and feel like I still need to do two of them. Right. Because the customer is going to ask for something.

Yeah. Don't, don't fall into this trap of your salespeople complaining about the recon process because this happens because the salesman's phone are getting blown up because we sell junk. The left, that's right, the left rear window broke or whatever. Right. And so what, what can happen is your salespeople can start to poison the recon process. Don't let that happen. As Jeff wrote in our notes here, the standard recon has to be set by someone and it really should come from the top down. And so you explain to your internal manager, your service writer, whoever handles the recon, this is my standard and I want it done this exact way. I, I do. We do a lot of air filters and cabin filters and wiper blades. Because the first thing that Midas or Firestone sells a customer when they come to get an oil change are these things. And if you really want a customer to get kind of angry at you when they go to get their first oil change, not from you for, for some reason, and they get sold 400 worth of things they need, that can create a hot customer too. So depending on the car you sell. Now that's not for everybody, but make sure, you know, you taking care of those little things can really build a lot of, you know, a lot of good will on, on the back end. You can build, you can build good will both ways by taking care of the customer if there is a problem or by reconning your car to, to a certain level, but make sure, whatever that is, that it's a standard and it's set by you and then pushed down to the people work for you.

Yeah, I think that's, you know, if you guys are in the buy here, pay here industry, there's obviously a rub with a lot of salesmen of, hey, you know what? We, we charge top dollar, but we're not recon in these things to top dollar. You know, it's like, where's the. You know, but that is a tough, tough balance. Right? Because there's always something more that could be replaced, repaired on this car. And guess what? There's always something that's going to break tomorrow regardless of what you did and how much you drove it. So you've got to decide, hey, am I going to be super stingy on the front end in my recon and super generous on the back end, or am I going to be super generous on my recon and put everything into it and then be super stingy on the back end because I can't be generous on both sides? I ain't making any money, right?

Well, you can be. And we fall into that trap sometimes. You know, something you, you kind of glanced over was about the person that inspects your car. That, that technician. You know, you need to train that technician, and it really does need to be your best one. And you've got to, to really work with him and say, let's make sure we're doing this the proper way. And that's something. Ben. When we, we had 20 group about a year ago, and I was going through the process with Ben and he was like, you know, Luke, you're doing this all wrong. And, and he kind of walked us down that path of having your best technician or one of your best technicians being your inspector. I was like, man, that's a total waste of a good tech. Right. Because it's just an inspection. When you think about it, how important that original mechanical inspection of your inventory is, then you realize that your best person should be on it and they should be following the same process every time. Super, super important. You picking the person, the technician that's doing that original inspection.

Absolutely. Cool. Luke, any other words of advice? I think that's, that's a lot for everyone to swallow.

It's a lot. The last thing I'm gonna tell you is this. There is a consistent drive pattern to cars as well. How many times have you driven around your, your town, your city, and seen that a dealer has on their frontline cars with auction stickers still on it. And what that should tell you is there's no recon process. Right. If you're one of those dealers and that's how you, you handle recon, you're probably not going to be in business long. And it's probably not something you want me to tell you right now. But I'm going to tell you that if you don't nail this reconning process, number one, you're never going to have repeat business because you're not selling a quality car. The cars you're buying from the auction that you think are retail ready and they right on the window is retail ready. It's not retail ready. If, if the, if the least thing you do is when that car gets off the truck and scrape the windows yourself and you take it on a consistent test drive of 15 to 20 miles, that's better than nothing. And sending it across the street to typically get the oil change. This is better than nothing. But you have to have something. If you don't have something, you will not last in this building, in this business, and it's not worth it.

It's, it's the fundamental. I mean, it really boils down to the whole aspect of the business model and why dealerships exist in the first place. As a used car dealer, the only thing we have to offer is add value. We have to be able to add value between the wholesale markets and the retail markets, or what good are we? We're nothing. If we're just a parking lot between the auction and the consumer, then you, you are easily replaced and you are easily pushed out of business. Now, if you are a reseller of products and you are adding value to those products from a wholesale to a retail transaction, that arbitrage of getting it, shining it, making it right, and then you're charging a markup for your time and efforts, that boils down to the whole effort of what we do. Right. So, yeah, I mean, if you're just flipping cars from the truck to the buyer, you know, you're, you're a broker or you're, you know, moving these things through with not so much as even looking at them. Ugh. Yeah, you're quickly squashed.

I'll tell a quick story we. I had and this has been a while ago, this has been eight, eight years ago or so. This is right before the big, the big mess up with the TDIs from Volkswagen and a wholesaler who I buy a lot of cars from and listens to the podcast he he said, man, I've got this Volkswagen diesel wagon I cannot sell. And I said, no problem. Bring it to us. We'll get it sold. And I said, you know what? There's no need to. To take this car through recon because it was at the Volkswagen store. They did the oil change, all this, right? So we bring it to our dealership, we sell it. The guy has the car for a week and calls me, says, the motor's gone. Oh, my gosh. Motor's gone. What happened? Well, the Volkswagen store didn't tighten up the oil drain plug, which. Which we would have caught if I did my normal recon process. Because. Because we would have changed the oil, right? Even if it. Even if it had been changed, we'd have changed it again. That simple thing of not following my recon process cost me four or five thousand dollars because I had to put an engine in that car. Luckily, I put an engine in that car and sold the guy two more cars after the fact. Really great guy. Lived down in Savannah. But the point of this story is the recon process is vital to being a good dealer.

Yep. And then, Luke, hey, I think it's a good episode. Let's end it there, and we'll talk to you guys next week.

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