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Old 04-24-2017, 09:06 PM
 
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Quote:
Originally Posted by dillionmt View Post
Actually, it is not uncommon for a dealer to have in stock one ugly duckling. It is usually ordered for a sales promotion, is priced at a rock bottom level, and the dealer hopes it does NOT sell. It might be missing an expected option, or more likely, an odd ball color.

They are great deals for those that want just a new vehicle, and don't care about the options.
The dealer hopes it doesn't sell? That's crazy....turning the inventory is the most important thing you can do in the new car business.

I don't disagree that some dealers order these basic cars to advertise a low payment, but they won't do it on a car that will be hard to sell. It's a fine line there but they will still get the cheapest car they think certain customers will still buy.
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Old 04-24-2017, 10:37 PM
 
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Originally Posted by iamweasel View Post
The dealer hopes it doesn't sell? That's crazy....turning the inventory is the most important thing you can do in the new car business.

I don't disagree that some dealers order these basic cars to advertise a low payment, but they won't do it on a car that will be hard to sell. It's a fine line there but they will still get the cheapest car they think certain customers will still buy.
I spent numerous years consulting to dealers in North America. I think I have just a little idea of what occurs.
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Old 04-25-2017, 07:29 AM
 
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Originally Posted by dillionmt View Post
I spent numerous years consulting to dealers in North America. I think I have just a little idea of what occurs.
Good for you, I have 25+ years in the industry myself and have a little idea of what occurs, too. To say that as a general rule dealers will stock a car that won't sell on purpose is just ridiculous.

Do they stock low price cars of each model to advertise low payments? Of course they do....but those are cars they feel confident that will sell in a timely manner.

If a dealer truly wanted the lowest price car they could get their hands on, then you would have seen more specials advertised with cars that had manual transmissions. (While they had them in most models.) That didn't happen....dealers didn't stock manuals for the most part because they knew they could get hung with it for a long time. It's a fine line, but you have to stock what you can sell or you risk piling up floorplan bills, curtailments, etc.

Now not sure what kind of consulting you did but unless you were something like a NADA 20-group moderator then usually consultants were needed by poor performing dealers. Maybe what you saw was true for some of those dealers but I'd argue that's the exception not the norm. (Good dealers generally do not need consultants.)
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Old 04-25-2017, 08:35 AM
 
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Quote:
Originally Posted by iamweasel View Post
Good for you, I have 25+ years in the industry myself and have a little idea of what occurs, too. To say that as a general rule dealers will stock a car that won't sell on purpose is just ridiculous.

Do they stock low price cars of each model to advertise low payments? Of course they do....but those are cars they feel confident that will sell in a timely manner.

If a dealer truly wanted the lowest price car they could get their hands on, then you would have seen more specials advertised with cars that had manual transmissions. (While they had them in most models.) That didn't happen....dealers didn't stock manuals for the most part because they knew they could get hung with it for a long time. It's a fine line, but you have to stock what you can sell or you risk piling up floorplan bills, curtailments, etc.

Now not sure what kind of consulting you did but unless you were something like a NADA 20-group moderator then usually consultants were needed by poor performing dealers. Maybe what you saw was true for some of those dealers but I'd argue that's the exception not the norm. (Good dealers generally do not need consultants.)
I worked for one of the large DMS suppliers, and you're wrong, it WAS the good dealers who where the more likely to engage my branch of the company to better implement, data-mine and utilize the software. I saw the good, the bad and the ugly. Some were great, had the highest CSI, gross profits and absorption rates, and cared about all of that. Others just stumbled along, and in some cases, jeopardizing their factory warranty approval level.

Your comment about floorplan assumes that many of the great dealers utilize full floorplan room. In fact, that is not what can and does happen. I ran into a number of dealers who floorplanned each vehicle to a minimal amount not because they needed to, but because they wanted the insurance coverage that some manufacturers included when floorplanning. These same dealers were getting over 8 turns in their inventory per year, which in anyone's book is great inventory management. They were also the ones who often would order that ugly duck unit, the one they could advertise at that rock bottom price, and would rather have in stock than sell it.

These same dealers who were getting 8 turns, were also the ones with the highest average gross profit on the front end, and did well on the F&I side also.
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Old 04-25-2017, 08:48 AM
 
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Ooh, cat fight
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Old 04-25-2017, 09:35 AM
 
2,376 posts, read 2,897,313 times
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Quote:
Originally Posted by dillionmt View Post
I worked for one of the large DMS suppliers, and you're wrong, it WAS the good dealers who where the more likely to engage my branch of the company to better implement, data-mine and utilize the software. I saw the good, the bad and the ugly. Some were great, had the highest CSI, gross profits and absorption rates, and cared about all of that. Others just stumbled along, and in some cases, jeopardizing their factory warranty approval level.

Your comment about floorplan assumes that many of the great dealers utilize full floorplan room. In fact, that is not what can and does happen. I ran into a number of dealers who floorplanned each vehicle to a minimal amount not because they needed to, but because they wanted the insurance coverage that some manufacturers included when floorplanning. These same dealers were getting over 8 turns in their inventory per year, which in anyone's book is great inventory management. They were also the ones who often would order that ugly duck unit, the one they could advertise at that rock bottom price, and would rather have in stock than sell it.

These same dealers who were getting 8 turns, were also the ones with the highest average gross profit on the front end, and did well on the F&I side also.
We will just have to agree to disagree I guess. If you're point of view is from a DMS supplier then that's all I need to know.

Nobody in their right mind is going to order an ugly duckling that will sit there for 1, 2, 3 years.....It has to sell eventually, and relatively quick. Even if you have a few units that are floored for minimal amounts it still costs money to hold that unit. (Insurance, fuel costs, cleaning/washing, accidental damage, etc...not to mention depreciation as the unit ages since you have to keep discounting it.)

If you order a cheap car and you sell it, guess what...they can make more! So order a few at a time if you want to, then you don't have to bait and switch your customer into something else, you can actually sell them exactly what you advertised.

You have to be able to sell it at some point...otherwise dealers would have a lot of expensive yard art sitting around...
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Old 04-25-2017, 10:10 AM
 
504 posts, read 297,601 times
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Quote:
Originally Posted by iamweasel View Post
We will just have to agree to disagree I guess. If you're point of view is from a DMS supplier then that's all I need to know.

Nobody in their right mind is going to order an ugly duckling that will sit there for 1, 2, 3 years.....It has to sell eventually, and relatively quick. Even if you have a few units that are floored for minimal amounts it still costs money to hold that unit. (Insurance, fuel costs, cleaning/washing, accidental damage, etc...not to mention depreciation as the unit ages since you have to keep discounting it.)

If you order a cheap car and you sell it, guess what...they can make more! So order a few at a time if you want to, then you don't have to bait and switch your customer into something else, you can actually sell them exactly what you advertised.

You have to be able to sell it at some point...otherwise dealers would have a lot of expensive yard art sitting around...
The ugly duck always does sell, as there are always buyers for the basic, but what it does, it created traffic for the dealership. BTW, I also was a GM for a franchised dealer, so I know both sides. You don't get to be a consultant for a DMS supplier without significant hands on experience first.

The issue of minimal floorplan on units was done because it was cheaper to have the manufacturers insurance coverage than buying it directly.
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Old 04-25-2017, 12:52 PM
 
2,376 posts, read 2,897,313 times
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Quote:
Originally Posted by dillionmt View Post
The ugly duck always does sell, as there are always buyers for the basic, but what it does, it created traffic for the dealership. BTW, I also was a GM for a franchised dealer, so I know both sides. You don't get to be a consultant for a DMS supplier without significant hands on experience first.

The issue of minimal floorplan on units was done because it was cheaper to have the manufacturers insurance coverage than buying it directly.
Well if the ugly duck sells that's a different discussion than "dealers stock what people don't want" or "dealers stock what doesn't sell." That's all I was debating here...the ugly duck may be cheap but it *IS* something the dealer feels they can sell. That's all I have been trying to say. A dealer will only stock what they can sell - period. They are not going to stock the "super-ugly" ducklings (like manual transmissions in a 4-door sedan) knowing it would be months or years to sell.
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Old 04-25-2017, 12:55 PM
 
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I think the "ugly duck" in this conversation is a stripped down bare-bones version, which inevitably will sell. At least get people in the door and go from there, "for only $2,000 more you can get A/C, power windows, etc"
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Old 04-25-2017, 01:30 PM
 
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Originally Posted by IShootNikon View Post
I think the "ugly duck" in this conversation is a stripped down bare-bones version, which inevitably will sell. At least get people in the door and go from there, "for only $2,000 more you can get A/C, power windows, etc"
Agree...just don't try to tell me that dealer's stock what doesn't sell. (Which is what a different poster alluded to previously, not dillonmt.)

You may stock a mix of one ugly duck and 9 premiums, but you know all 10 of those should sell relatively fast. Not many dealers will stock a "super-ugly" duck that they know will take a year+ to sell. There is a line there you don't want to cross.
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