To earn top dollar in the automotive industry, you have to offer top products. If you deal with used cars, you know that most of the inventory you stock will need some love before you can present it to a customer.
Auto reconditioning is what transforms banged up trade-ins into cars that customers will love.
The used car market is booming, which is pushing the price of used vehicles higher than ever. To compete with these rising prices and customer expectations, dealers need to invest in better reconditioning practices. Doing so will not only improve a dealer’s profits, but provide the long-term benefit of happy customers.
What is Auto Reconditioning?
No used car, whether bought at auction or through a trade-in, will be immediately ready for retail. Investing a small amount of time and money to fix minor issues can significantly boost a vehicle’s retail value. This is the purpose of reconditioning.
Reconditioning includes, but is not limited to:
- Engine repairs
- Oil and filter changes
- Maintenance on the drivetrain and suspension
- Equipping new brake pads or tires
- Fixing dents, chipped paint, cracked windows
- Buffing out scratches
Auto reconditioning attempts to restore a vehicle to its optimal condition so it can be sold at the maximum price the market will allow.
The Benefits of Auto Reconditioning
Reconditioning ensures buyers leave the lot happy and return with a smile when it’s time to purchase another vehicle. The benefits of reconditioning far outweigh the cost in time and money when done correctly:
- Higher Retail Prices. Reconditioned vehicles can be sold for a higher retail price. There is usually a several thousand dollars variance between vehicles in average condition and those in clean condition. In the VINCUE image below, you will see how the same exact type of vehicle is appraised differently based on its condition:
- Faster turn rates. Humans like things that look nice, and the market for fixer-uppers is much smaller than for vehicles ready to drive off the lot. This is why reconditioned vehicles are more likely to find a buyer quickly.
- Offer warranties and certifications. Reconditioning allows your dealership to issue certifications and warranties, which increase consumer trust and satisfaction.
The Cost of Reconditioning
Reconditioning is an investment, but it does not have unlimited returns. The money spent on reconditioning needs to be monitored and compared to the margin you make on each vehicle. It’s essential to accurately appraise a vehicle and factor in reconditioning costs before approving the work.
A good ballpark for reconditioning costs is $1,000. If you designated the vehicle as a retail unit, then anything higher than $1,000 should be subject to review:
- Is the vehicle in high demand?
- Does it have high mileage?
- Can you sell it quickly enough?
The goal for reconditioning is to restore a vehicle to its maximum retail price while spending the least amount possible. However, this should never come at the cost of quality.
Best practices for auto reconditioning
Cost and speed are the two major considerations when reconditioning vehicles to sell. Time is money, and every day your vehicle goes unlisted while waiting reconditioning is money lost.
Remember the saying: “20% of the effort is responsible for 80% of the result.”
Here are some reconditioning best practices to make sure you put in the right 20% in every vehicle:
- Optimize Reconditioning Costs. Dealers should constantly root out inefficiencies and excess costs in their reconditioning process. One way to reduce costs is by using quality, non-OEM parts. Dealers should make sure, however, that this doesn’t disqualify them from any certification programs.
- Fast Turnaround. Complete reconditioning within 3-4 days from acquiring the vehicle. More days in reconditioning means longer turn rates and less gross profit. The optimum period to sell the vehicle is 30 days.
- Buy better vehicles. Sometimes the best way to reduce reconditioning costs is to buy vehicles that need less work. Look for vehicles that are virtually ready to roll off the lot to offset the cars that need extra work.
- Have a reconditioning team. Don’t make your services team decide between reconditioning a vehicle and working on a customer order. Eliminate this conflict by having a dedicated reconditioning team.
- Recondition for Wholesale. Some dealers overlook reconditioning for wholesale, but this is a mistake. Dealers are human too, and everyone is more likely to buy a vehicle that is in good shape. Reconditioning a vehicle before auction could help you net a few hundred, even a few thousand dollars more.
Investing in Reconditioning
Can you afford the investment in reconditioning? The real question is, can you afford not to invest?
Reconditioning used vehicles is an investment that can reap huge dividends for your dealership. When done right, reconditioning can add thousands of dollars to the final selling price, netting you higher profits and happy customers. The benefit is multiplied with every extra vehicle you sell thanks to faster inventory turn rates.
Doing reconditioning the right way takes its own investment of time, education, and tools. Dealers who commit wholeheartedly to improving their reconditioning practices are setting themselves up for success for a long time.