Most car dealers know and appreciate that the holding cost is about $50 per day for cars based on floor plan cost + depreciation.
And most dealers are looking to improve their turn time in reconditioning in order to gain more gross and increase sales volume.
But what very few dealer understand is the impact of their time and decision frequency (indirect costs) in the process.
If the average hourly cost of dealership personnel is $40 / hour, and a dealership “buys” this time from their sales managers, service managers, inventory managers / porters & accounting and admin personnel….it’s easy to say that each used vehicle sold can burn 2.5 hours of unnecessary time by having an unorganized reconditioning process and heavy admin burden.
So, a dealer that sells 100 used cars a month that could save 4 days turn time and has inefficiencies with process is easily losing $360,000 per year!
$40 (hourly dealership employee comp) x 2.5 wasted hours per car = $100 x 100 units x 12 months = $120,000 per year
$50 depreciation & floorplan cost / day x 4 days x 100 cars = $240,000 per year.
And this is just the tip of the iceberg. Once you add in the additional gross profit per car and increased units (by having cars listed and ready to sell faster) the additional dealership profits can exceed $1 million per year.
Every minute counts – effective and efficient process in reconditioning are some of the most valuable investments a dealer can make.