Digital Dealer: Add $1.8M to Your Bottom Line Buying Cars from the Public Buying Cars from the Public

Welcome to Digital Dealer 2021, Las Vegas. My name’s Danny Zaslavsky. And welcome to How To Add $1.8 Million a Year to Your Bottom Line Through Buying Cars From the Public. So like I said, my name’s Danny Zaslavsky. I’m the Dealer Principle of Country Hill Motors in Kansas City and managing partner for VINCUE, a technology company. I’ve got 25 years’ experience in the automotive industry. Our car dealership began city sells between 200 and 300 units a month, both resale, retail, and wholesale. And we’ll talk about that a little bit on how our strategy is. And we used VIN solutions for our CRM, Reynolds as our DMS, and VINCUE for our inventory management market pricing acquisition system.

I want to share a little history about where we’ve come from and what we’ve learned. About seven years ago, we decided to get really serious about private party acquisition. What we knew at the time were we were paying auction fees around $500 a car, plus transportation costs, plus post-sale inspection fees, plus what I call expert tax, where you simply pay more because you’re in lane competing with other experts and paying more because of it. And then often buying other people’s headaches, because you’re bringing them back, and then you’re doing service to these vehicles and the reconditioning costs were higher. And then beyond that, the worst part of it all, we were going to the auction and not always coming home with the cars that we actually wanted to buy. So we turned our car dealership, not in just to a business that sell cars, but a business that also buys cars.

So on the screen is some math to share some of the impact that we’ve had since changing our culture to not just selling, but buying. We track how our acquisition channels tally up gross per copy on the front and on the back. And so relative to our auction buys, we’ve been able to increase on average our front gross per copy by $1,200, so that’s $1,200 more than an auction car makes. On top of that, we obviously nixed our auction fees. We nixed our transportation fees. We’re no longer paying for expert tax or post sale inspection fees. And we built a department that today buys between 80 and 120 units per month, so on average, about a hundred. And that has increased our gross by $200,000 a month.

And when you take our vehicle acquisition cost, so that’s payroll, that’s advertising, that’s technology, out of that equation, that leaves $150,000 net profit a month lift, which equals the 1.8 million a year impact. The impact’s actually greater than that, and we’ll talk about it. One way that it is greater is because of trades. The private party acquisition leads that we get, the opportunities that we get, about 15% of those never actually sell us a car, but they end up trading the car once we identify why they are selling their car, so you also gain customers. A lot of cool opportunities there.

So how I got here, again, it all started at the auction. My dad was the guy that was innovative in the early nineties when he bought some Nextel phones and passed them out to local new car dealerships and said, “Hey, when you’re bidding this car, page me and I’ll tell you what it’s worth.” And we did with five or six car dealerships near us. And that was an innovative thing to do in the nineties because people didn’t know what they would get at the auction.

Well, as groups started buying car dealerships and making mandates where you had to take cars to the auction, then the competition obviously got stiffer, vehicles started getting more commoditized, and MMR or transactions became the thing to look at. Well, I personally never felt like I got what I needed, and I was always the last idiot with my hand raised. And so I really didn’t like going to the auction. About seven years ago, my dad actually had a stroke. And because he was our predominant and a buyer, I knew that, hey, we had to do something different. And so like the old saying, a lot of opportunities are created from pain. That was the pain that really got me thinking about private party acquisition seriously.

So if not at the auction, then where. So I am in Merriam, Kansas, right across the street from me is a CarMax. And they’ve been buying cars from the public for over a decade now. I kind of laugh today because that also means that we as car dealers have been letting them buy cars from the public for that long and not taking that side of the business seriously. But recently, down the road from me, a Carvana’s opened, and we all also know about other competitors like Vroom. And all three of them have Vehicle Buying Centers, VBCs, Vehicle Buying Centers. I’m going to say that over and over, because it’s really important because it becomes a piece of the business.

And so they’re serious about acquisition, both from a digital side, so a digital acquisition process. As you can see, consumers can go online to any one of these sites, put in their vehicle information and get an instant offer to purchase their car. And it isn’t a wet blanket offer. It’s a real offer. And they have a process, somebody else on the other side to make that acquisition. So I thought to myself, “Well, gosh, we could do this, and we could solve this problem.”

So in 2016, just to give you a little bit of a roadmap, we were buying between 20 and 30, oh, sorry, between zero and 30 cars a month. That was the year that I met Darren Barker, who currently runs our Vehicle Buying Center and shook his hand and said, “Look, I don’t know how we’re going to get there, but we’re going to figure out how to get to over a hundred. And I know we can do that partially with some data, with some technology, and also with some dedication.” Well, there was a lot of learning that happened in those couple years to 2018, where we started figuring out, “Okay, we could buy 30 to 50 consistently.” And we started identifying the different avenues for buying cars.

And what we learned are there are actually five. So the first one, and you’ll hear me talking about them later, is inbound. Inbound means that’s any consumer that’s coming to you to sell their car. The second one is outbound. Outbound is anytime you’re going out to a consumer to buy their car, meaning you saw it on a third-party listing site like Autotrader or Cars.com or CarGurus. And then the third one is third party. So if you buy Kelly Blue Book instant cash offer, that is a great way to fill your bucket with opportunities to buy from the public. The fourth way is service lane, service drive. And the fifth way is conversion to trade. And for new car stores, there’s actually a sixth way, which is lease returns, not something that we had, because I’m an independent, but there is that.

So as we started identifying those, by 2020 we started putting cadence to every one of those and hired additional agents and were able to cross that hundred threshold. So let’s talk about how to build your Vehicle Buying Center and how it all works. There’s four key areas on how to make the sausage, as we say. The first is lead generation. It’s important that you look at your opportunities by acquisition channel, because each one of those acquisition channels at different times of the year is going to produce different results. And when you can see those acquisition channels in their own swim lanes, then you can really scale those.

The next step is people. And I’ll give you an example. We learned over time that like sales people, a salesperson can only sell between, call it 15 and maybe 25 cars a month. There are those exceptions of savants out there that can sell 30, 40, and even 80 cars a month, like a couple guys I know and girls I know. But traditionally, a salesperson can sell between 15 and 25. Now, a Vehicle Buying Center agent can purchase between 20 and 30 a month. So that’s the math that we used when we started scaling. And then we took that and divided it by our total expense and were able to figure out our customer acquisition cost. So we’ll talk about that as well.

So lead generation, people, which is the people you have in your store, and then process. What processes are you deploying? And what we learned is there are different processes, whether it be inbound, outbound, third party, whether it be service drive, whether it be you’re converting that private party opportunity into a trade, or getting a lease return. Those are all different processes for acquisition that produce the same result. You get inventory, but the way that you work them treat them, benchmark them are slightly different.

And at the butt of this cow that provides the gas, hope you got that joke, is technology. That’s the fuel that really powers a lot of this and allows you to scale. Because you can certainly glue it all together, but the way to really scale it and be efficient both in your lead generation, your people, your processes, and ultimately your result is to tie it all together with some really cool tech.

So let’s talk about lead generation. And this is important because dealers for years have been shouting, “Hey, we sell cars, and we give you all these cool incentives, campaigns, opportunities to do business with us.” Whether it be payment, whether it be lease, whether it be outright purchase, whether it be when you purchase this, you also get this, and sales, and all this stuff, that we’ve been so good at for so long. Now, when you look at acquisition, the singular purpose here is, obviously, to buy cars from the public. But what we have to start thinking about in today’s world, what are the different channels that you can share that message, that number one, “Hey, you not only sell cars, but you buy cars.”?

So when you list them out, obviously you have social media, you have YouTube. Some of you are doing podcasts, in store either signage or conversation, for instance. When you call my store, we say, “Hey, thanks for calling Country Home Motors. Are you calling about buying a car or selling a car?” So that way we know. And then sometimes customers say, “Oh, I didn’t know you also just buy cars.” And outbound, digital ads, organic video content, sales spiffs service hang tags. We’ll talk about that in a little bit. But these are all opportunities to share with your community and with your store that you not only sell cars, but you also buy cars. So make that list and start considering all the ways that you can tell your clients that you have another way to do business.

So there is a difference between inbound and outbound. And I want to talk about that for a second. So inbound is a consumer that’s going to your website, clicking on a button that says you buy cars. You have a button on there that says, for instance, with us, it’s www.SelltoCountryHill.com. That’s where we send our customers. And so we tell everybody, “Want to sell your car? Go to SelltoCountryHill.com, and you’ll get an offer right away.” We use that and we share that through social media, digital advertising campaigns. We do it through email marketing campaigns. We do it on billboards and signs. We do it with QR codes, on hang tags, in our service drive, all sorts of ways. But ultimately that consumer lands in our acquisition CRM, where we work that customer in order to solve their problem of selling their car. So obviously, we solve that problem by buying it right.

We also have different techniques in order to make sure that we can share relevant data with them, so they know that the number they’re getting is a very strong number. And that’s important, because the number one concern that consumers have about selling a car to a dealer is they think that the dealer’s just not going to give them enough for their money, that they’re going to try to steal a car. And that is simply not true, especially in today’s economy. So we can use data to our advantage. Now that is inbound. Inbound is its own ecosystem. And there’s a lot of strategies we can deploy there. And I’m going to share some of those here in a few minutes.

Outbound is different. Outbound is where we use technology to prospect private sellers. So these private sellers may be on Facebook, may be on Craigslist, Autotrader, CarGurus, eBay, you name it, anywhere you can list a vehicle for sale on your own. And what happens is you then reach out to that consumer and say, “Hey, I saw your Honda Odyssey online. I think they’re really cool. I’m interested in learning a little bit of more about it. Any chance you can send me a VIN number?” So that you can get maybe a CARFAX on it or get a better idea of value and bid, and then be able to share that with the consumer and hopefully get them to sell you their car.

So these convert higher than third-party conversations. The reason is, is because you’re having or establishing meaningful connections with consumers. They’re not just getting a number. They are actually online, actively trying to sell their car. You can see what they’re selling it for. You can see the pictures of it. You can see sometimes even the VIN number if the consumer lists it. And you can put that into your market pricing tool and get the data you need in order to have a meaningful conversation.

So these are some ads. And so there’s different ad. This is at Country Hill Motors. But now if you guys want to see our whole, all of these, if you just go to YouTube and type in “Sell to Country Hill Motors” on YouTube, we actually have a playlist that has testimonials and anchor ads and short ads and clips and all sorts of stuff. But I put these up here for a reason, because in the top-right you can see digital content that has, those are static ads. And those are great, ineffective, but what’s more effective is having video. And video can be looked at a couple different ways. One way is using what we call an anchor ad. So let me share this with you.

Selling your car can be a long drawn out event. Well at Country Hill Motors, we’ve changed all that with our Vehicle Buying Center. Sell your current vehicle to Country Hill Motors at our Merriam location and all those headaches go away. We give you top dollar and pay you more than other dealers with our instant cash in your pocket. Go to SelltoCountryHill.com or drive into our Merriam location and let our appraisers give you instant cash in your pocket. Our buyers pay more and you get more.

Get a great deal at CountryHill.com.

So there you go. So that is what we call an anchor ad. That told the consumer what they’re in for, where to go, what they would get when they got there. It’s a complete ad, and those are really effective. Let me show you another one that we had some fun with.

Hey, you got a couple extra cars in the driveway, and you want the best deal. You might go online and try to sell. Some of these guys are going to make you feel like you’ve been hit below the belt. You know what I mean? You want to sell? Sell to CountryHill.com. You’ll get the best deal. You know what I mean? I even told Paulie about it, and he’s kind of relaxed brain. You know what I mean? Absolutely. CountryHill.com.

So that’s our Rocky impersonator. Another one we think is pretty funny is the short ad we use for social.

Country Hill Motors wants to buy your car. Okay.

Get a great deal at CountryHill.com.

The last one I’m going to show you is what we use the most. So when you come to Country Hill Motors and you want to sell your car, the first thing we do is we give you an intake form to fill out. It asks you how many keys you have, if there’s any mechanical issues, all that kind of stuff that really helps us give you a good value. But once we do the deal and we buy the car from you, we also ask you to do an exit interview, which includes a little form that asks you anything about the vehicle that you want to share with the next owner of. And then we actually take that, put it into the vehicle comments on the VDP. Which is really cool, because customers love hearing from the previous owner. But then we also do this little video.

This was one of the best experiences I’ve ever had selling a car.

The service people were great over there. The buyers over here were great.

The whole process was easy and seamless. The communication was good.

They gave me a very fair offer right off the bat.

Went very, very smoothly. I couldn’t have asked for a better experience.

Just made my situation easy.

The team was really great. They worked with me and what my needs were.

It was simple and easy. And in and out quickly.

10 out of 10. I would definitely recommend coming down here if you need to sell your car or even purchase a car today.

Those testimonials live all over our website, on social media. Obviously on YouTube, you can see a bunch of them. And they tell other customers, “Hey look, actually, they gave me what I wanted, and they made it easy.” Because once you kind of get over the issue of how much the consumer’s going to get, then the dealership becomes an asset, because your money’s good, you will make the payoff, you’ll do all the paperwork. So there’s a lot of convenience that happens when you sell a car to a dealership.

I want to throw this up here. This is an example of a vehicle hang tag that can go in either in the service drive. Or you can use it in other forms, whether it be if you’re going to be putting them on a sign within a showroom floor, somebody can scan it. But we want to buy your car. It drives the consumer to the sell-to landing page where they can get an offer. And if they like the offer, they can click a little toggle switch that says, “Yeah, I’m interested, reach out to me.” And if not, if they’re just using it for information, they could say, “Thanks, this served its purpose.” But this is a really great way to connect with your consumers and help them understand what their vehicle is worth.

With a Vehicle Buying Center, it’s important that you build your team. And what we learned early on is that salespeople and buying agents have some really big differences. Salespeople are very transactionally motivated. They want that instant gratification of making the deal. We joke they’re part animal, part human. And then they advocate for the car and the car dealership. Well, what we learned is buying agents are relationship motivated. It’s more about educating the consumer and building a friendship with the consumer because you’re helping them with data. Because at the end of the day, they’re not writing you a check. You’re writing them a check. And instead of being an advocate for the car and the dealership, the buying agent is an advocate for the seller, because we’re working to solve their issue of selling that vehicle.

So this gets us into understanding the motivators. And so from a buying agent’s perspective, remember, money only exchanges hands when problems are solved. So if you think about it that way, money only exchanges hands, when problems are solved, then we need to solve the problem. So my friend Joe here, sitting on a scooter, you can see his t-shirt says, “#ScooterLife.” He just decided, “You know what? I don’t need a car anymore. I’m all about that scooter life.” So his motivator is to sell his car because he is not going to need it anymore. So his motivator is to get rid of maybe his car payment. Maybe he wants to get rid of it because he doesn’t need to trade. And so he could use that cash to buy that scooter. Maybe he has a major life change because he moved to a city where a scooter’s going to be just perfect or maybe he’s helping a family member.

But identifying what that motivator is, and then using that as the word track to the end of the acquisition is really going to help the buying agent capture the heart of the seller a lot better than just saying, “Oh yeah, we buy cars, and I want to buy your car.” That broken record isn’t going to help you scale and serve your community. So be curious about why the seller is selling their car and then help them solve it.

And I’ll give you actually another example of when that turns into a trade. So if you ask the consumer, “Hey, why are you selling your car?” And they say, “Well, I don’t need it anymore.” And then the buying agent says, “Okay, cool. Well, what are you going to be driving? What are you doing for wheels if you don’t have a car?” And the customer might say, “Oh, well, you know what, I’m actually going to be looking for a truck because I need it because I just started a construction job.” And the buying agent says, “That’s awesome. By the way, we have trucks. Did you want me to connect you with somebody to show you some options? And Hey, if it doesn’t work out, keep in mind, I would love to still buy your car. So don’t let that change the deal.” And then the customer set might say, “Absolutely.” So it’s having that common language. This isn’t scripted here. We’re using intentional conversation here to identify what the motivator is of the consumer and then working to solve that problem.

Okay. So this takes me to how to set up a Vehicle Buying Center. Whether you want it to be led by sales, whether you want it to be led by buying agents, or even a dedicated buying manager and a team. So you’ve heard good, better, best. I actually called this bad, better, best. So the worst way to do it is to have just sales people instead of eyes and a used car manager. I don’t care if you’re paying them $500 per car to buy the car. You’re taking their attention and cutting it in half and saying, “Hey, you should be buying and selling.” And I’ve just never seen it work. And I’ve personally tried it, and there’s no way to really scale. You’ll still buy some cars, but you won’t be able to scale to the numbers that you want.

So the better way to do it is to hire dedicated buying agents. And those agents would report to the desk. So they’d be working those opportunities. They’d be setting those appointments. They’d be using the sales manager to T.O. any deals that they need help with. And the sales manager still holds what I call the sales gavel, whether that car is bought or not. And in working those T.O.s, but they’re dedicated buying agents.

Then the best way is to have a buying manager in between. So the buying manager runs and scales the team and works with the used car manager to still do those T.O.s. But now the buying manager will be able to not just scale the team and acquisitions, but also be able to focus on what churns better, what grosses better. So that when you’re doing acquisitions, you can have a buying plan with targets in place to know what to buy, and what we call no flies, what you shouldn’t be buying.

So here’s our process at our car dealership. The buying agent works to set appointments by creating meaningful connections through engagement. Then when the customer comes in, they do a customer intake form. We test drive the vehicle. Sometimes we’ll take it down to service and take a look at it closer if we need to. Then the final vehicle appraisal is done by the buying manager. And then once the deal is struck, then the buying agent does all the paperwork necessary to acquire the vehicle, and then titling and vehicle payoff if there’s a loan. And at my store, we only pay once we have a lean release. So the customer’s sometimes waiting 10 to 14 days, but we give them enough paperwork to know that they’re safe. And obviously if it’s a cash deal, they’re leaving with cash within 20 minutes. And then we ask for that exit interview with the testimonial, and that’s really awesome.

Okay. So here’s where you supercharge this with technology. And if you look on the background of this image, this is my favorite screen. It’s the money screen. These are all the acquisitions within the acquisition system. So in here, this is where the consumer goes to the sell-to page. They put in their information. They put in their telephone number. They put in their email address. They can put in the miles of the car, or they put in the VIN if they have it. And then they click to get the offer.

The consumer then gets the offer on the vehicle, what the dealership would buy it for, what they could trade it for, what they could sell it on their own for. We give them relevant data to know what they need to do. And then this is texted to their cell phone, and that’s when the conversation starts. So they can click on it. They can share it, and they get educated. Then that falls into the acquisition system. And that’s where we call those inbounds. Now, those convert high because those customers are knocking on your door, to sell you their car. So the only reason often that it’s not happening is either, obviously, because of money or because the dealership may not want the car.

Then, outbound is where you start bringing in all these third parties. And this is where you can see, you can start filtering and sorting and assigning and reaching out to these consumers. And our system gives us the ability to really see the appetite for that dealership of a particular vehicle, so we can continue to educate our VBC agents on how to attract the right inventory. And you can also flag or trash or save listings, all the while the system is getting better at identifying what we call targets.

So once the vehicle is identified, whether it be through inbound, outbound, third party or so forth, we look at the, what we call an RMV or Retail Market Value screen. And this is where we can see what we call comps. We can see book values. We can see vehicle history. We can see the need for that vehicle at the store. We can look at history on the car, to see where did that car come from before this customer bought it? Where did they buy it? What did they pay for that? All that’s within our system. And our goal isn’t to try to negotiate down over the phone. That is not the goal, because we actually want to give the consumer what we call highest and best, because we know it’s a competitive market out there. So we focus not just on giving them best value, but we also focus on their motivators, why they want to sell it, so that we can work to solve that issue.

So then within the Vehicle Buying Center platform, we track all that. So we can see when it was acquired, when it was sold, what that churn was like, what we paid for it, what it sold for, what the vehicle gross was. And then we can do that by acquisition channel. So we can see our auction acquisitions, how many we bought, which auction we bought them from, what they gross, what the average churn is, what the average investment is. And then we can do that on our trades. We can do that on our dealer network purchases. And then we can do that on our Vehicle Buying Center. And that’s how we know that, for instance, at my store right now, we’re averaging 3,600 a copy on the front, versus auction buys are between 900 and 1,000 per copy on the front.

All that metrics is on what I describe has to do with the vehicle once it’s acquired. But we can also see while it’s being acquired, where those opportunities are coming from. How many of those are engaging? How many of those are turning into appointments? How many of those we’re actually acquiring? And then what that percent acquisition is. So then we can know where to focus our time. And obviously that could change seasonally. That can change also depending on the rep and how good they are in the acquisition channel that they’re working in.

I’d like to wrap up. If you have any questions you can reach out to me. Again, my name’s Danny. My email and telephone number’s going to be on the next screen, but it’s just Danny@DealerCue.com. But at the end of the day, I say the pearl is worth the dive. $2,000 in additional gross and with a roughly $250 customer acquisition cost. When you take personnel and you take the advertising and technology out of it, that’s $150,000 additional per month, which is a nearly $2 million impact. And that is a conservative number. That is a very, very conservative number.

On my end, I’m on a mission to buy 200 cars a month from the public. If I can do that, then I no longer need other acquisition sources, and my dealership is a self-sustaining ecosystem. And that is just a beautiful thing. And that is a way to stay relevant in your communities and to continue solving problems for your customers. My name’s Danny Zaslavsky. My email is Danny@DealerCue.com. And I welcome any questions, or for you to reach out. And I thank you so much for your time today.