Shawn Foster Executive Trainer Sourcing Winning SF Inventory 5 Keys to Success
5 Keys to Success1. Understand your data2. Determine your needs3. Know your lenders4. Develop a strategy5. Use discipline
What Can You Sell?• Historical data
• What is selling from the dealership
• Reconditioning abilities• What can you get done effectively?
• Customer demographics. • What is the makeup of the customer in your store?
Credit, income, market demands?
Sample Dealer DemographicsScore # Bureaus % of Bureaus # Delivered % of Burs. in range
delivered
Zero Score 45 6% 4 9%
1 – 484 169 22% 11 7%485 - 539 75 10% 3 4%540 - 619 138 18% 19 14%620 - 660 83 11% 17 20%Military 34 4% 5 15%
Open Chap 7 27 4% 0 0%
Prime (661+) 249 33% 59 24%
Total 759 100% 118 16%
Opportunities Stand OutScore # Bureaus % of Bureaus # Delivered % of Burs. in
range delivered
Zero Score 45 6% 4 9%
1 – 484 169 22% 11 7%
485 - 539 75 10% 3 4%
540 - 619 138 18% 19 14%
620 - 660 83 11% 17 20%
Military* 34 4% 5 15%
Open Chap 7* 27 4% 0 0%
Prime (661+) 249 33% 59 24%
Total 759 100% 118 16%
Opportunities Stand OutScore # Bureaus % of Bureaus # Delivered Available Inventory
(units)
Zero Score 45 9% 4 31 – 484 169 33% 11 3
485 - 539 75 15% 3 2540 - 619 138 27% 19 11620 - 660 83 16% 17 38Military 34 4% 5 3*
Open Chap 7 27 4% 0 6*
Prime (661+) 249 33% 59 91Total 759 100% 118 157
Subprime Credit Tiers(example based on SF company data)
Special Finance Tiers
FinanceCompanies
Credit Score, Income & Other Customer Traits
General Term and APR Range
Monthly Payment Average
Tier 4
Tier 3Tier 2Tier 1
CAC/WestlakeGO / UACSantander/GLS / ACA
Chase/WellsExeter / CPSGM FinancialCapital One
GM FinancialCapital OneAlly / ChaseWells FargoSantander
450 – 540Low and hard to prove incomeMissing docs
525 – 575$2,500 - $3,000 Short job or residence
540 – 610$3,500 - $4,000
580 – 660$4,500 - $5,000
45 months25% APR
62 months21% APR
66 months16% APR
69 months11% APR
$300 - $330 $375 – $425
$400 - $450
$450+
What are They?
ACV usually less than 10K
4-9 model years old
Typically serves the bottom tier programs
Used Vehicle Inventory by TiersTier/Niche
% of Stock Units Max. Age Max. ACV Max. Miles Avg.MonthlyPayment
No Score 9% 4 9 $11,000 90,000 $359Tier 4 42% 17 9 $11,500 125,000 $400Tier 3 15% 7 6 $12,800 80,000 $407Tier 2 27% 13 5 $14,000 75,000 $403Tier 1 16% 8 4 $15,000 50,000 $397Open Ch 7(part of T3)
4% 3 5 $12,500 70,000 $419Military(part of T3) 4% 3 6 $13,500 75,000 $403
Pre-Owned Subprime Inventory and Where to Buy it
Tier Vehicles Source
T1 (best non-prime
credit)
Current year used (like-invoice), near luxury, well equipped, upper end rental units, off-lease units.
Physical & online auctions, off-brand franchise dealers vehicles.
T2 1 – 3 year old rental cars, less expensive current year (like-invoice), off-lease, fleet returns (PHH, ARI).
Physical & online auctions (fleet & lease lanes), GSA, rental car companies, off-brand franchise dealer vehicles, street purchases.
T3 Less expensive rental cars & fleet returns, new (or late model) trade-ins.
Physical auctions (fleet & lease lanes), GSA, CarMax, rental car companies, off-brand franchise dealer vehicles, street purchases.
T4 (worst sub-prime
credit)
Older, higher mileage units most often taken in trade, inexpensive rental cars.
Units taken as trade-ins, street purchases, franchise dealers, CarMax and GSA.
What Should I Buy?EverythingCars with slightly higher mileageRental carsLease turn ins, ReposPrivate Owners
Higher Mileage UnitsUnderstand where the finance company limits are and use discipline.
Many subprime finance companies are going 66+ months on vehicles under 70,000 miles.
These units are great payment cars.
Rental Units
With the average amount to finance in Tier 3 at $16,798, rental units are a great source for this customer.
Newer car with slightly higher mileage
Lease Returns and Repos
May run later in the sale
Often have low floor amounts and are there to go away.
• Public boards• Appraisal events• Buy events instead of sale events• Private Sellers, Estate Sales, Retirement
centers• Housing complexes
Community
www.gsa.gov
SmartAuction
Manheim/Ove
Physical auctions3rd party auctions(list some here)?
UCM/Inventory Disconnect
• Using tools vAuto/AAX/Redbumper and MMR.
• Often does not work lease/repo lanes.• Often does not buy units with slightly higher
mileage.• Does NOT know what the need is.
If any of these describe your UCM, your used vehicle profits are lower than they should be.
Employees• Establish a buying program for the employees
referrals.• Friends, family, others.• $300 - $400 fee attached to vehicle• High Gross Deals when sold• 30 employees, 1 car per year, $100,000 in
found gross profit
Service Drive• Consider putting a salesperson on the drive.
• Customers with high ticket repairs on older car
• Offer free appraisals while the car is in the shop.
• Spiff your service personnel to spot potential customers who may trade.
Cars That Can Be Financed
• Understand your finance company demographics• Use a spreadsheet to isolate opportunities• Learn the “deal killers or “knock out” cars• Behind NADA Clean Trade (target is $500 or
more after service on the lot)
How Can You Make It Easier?
Mileage Buy for >$1,200 under Trade
Pmt Term 24 36 42 48 54 60 66 72 Buy for >$1,200 to $750
2,100 3,400 4,000 4,600 5,000 5,500 5,900 Avg Book Buy for <$750 under trade
200 1,800 2,500 3,100 3,600 4,200 4,600 Buy For2,500 4,000 4,600 5,200 5,700 6,300 6,700 Avg Book Tax Rate 6.00%
700 2,400 3,200 3,900 4,500 5,100 5,600 Buy For Buy Fee $2002,900 4,500 5,300 5,900 6,500 7,100 7,500 Avg Book Doc + Warr GP $7851,200 3,100 3,900 4,700 5,300 6,000 6,500 Buy For Title +Warr Cost $7503,300 5,100 5,900 6,600 7,200 7,900 8,400 8,900 Avg Book Avg. Recon $5501,600 3,700 4,600 5,400 6,100 6,900 7,500 8,000 Buy For Avg Bank Fee $1753,700 5,700 6,500 7,300 7,900 8,600 9,200 9,700 Avg Book2,100 4,400 5,300 6,200 7,000 7,800 8,400 9,000 Buy For Avg APR 19.95%4,100 6,200 7,100 8,000 8,700 9,400 10,000 10,600 Avg Book Avg. Down Pmt $1,0002,600 5,000 6,000 7,000 7,800 8,700 9,400 10,000 Buy For Avg. Income $1,8504,500 5,800 7,700 8,600 9,400 10,200 10,900 11,500 Avg Book Avg. PTI 15.00%3,000 5,600 6,800 7,800 8,700 9,600 10,300 11,000 Buy For Avg LTV-Front 115%4,900 7,300 8,400 9,300 10,100 11,000 11,700 12,300 Avg Book Avg. LTV-Total 135%3,500 6,300 7,500 8,600 9,500 10,500 1,130 12,000 Buy For Desired Profit $2,5005,300 7,900 9,000 10,000 10,900 11,800 12,500 13,200 Avg Book4,000 6,900 8,200 9,400 10,400 11,400 12,200 13,000 Buy For Green Buys $750 $7505,700 8,400 9,600 10,700 11,600 12,600 13,300 14,100 Avg Book White Buys $1,2004,400 7,600 8,900 10,100 11,200 12,300 13,200 14,000 Buy For Red Buys >$1,200
Adjustable Inventory Purchasing Guide
275
300
325
350
79.9K 69.9K 59.9K 49.9K
225
250
425
450
Taxes and Fees
Deal Averages
Color Keys
375
400
Summary• Understand your customers• Understand your inventory• Understand your finance companies• Have a strategy• Use discipline
Thank You.
For More Information:
Visit http://www.dealerstrong.com/ Call our office @ 877-811-8107