Remember when you were in school how there was always that one kid in class who wanted to answer every question the teacher asked? Regardless of the subject matter or topic, he/she was always the expert. Routinely the teacher would call on them because nobody else had the desire to answer the question, only to find out Mr/Ms Know-it-all didn’t have a clue.

Today, at auctions around the country, that same personality is in the lanes buying cars and at the dealership appraising them. Often times, Mr/Ms Know-it-all is bidding on every car that comes through and it is apparent to everyone else at the sale they don’t have a clue what they are doing.

Why is it in our business we think just because someone is bidding on a car in the lane which we are standing, that makes them the authority on its value? How many times have you seen people buy vehicles and as you walked away from the lane shaking your head asked yourself, “What were they thinking”? More often than not, they weren’t thinking at all, but the one thing they just couldn’t do was “put their hand down”. Time and time again bidding in the lane becomes a contest to who has the strongest arm and the biggest ego. Thousands of units are bought each year and taken back to the store only to find out that they are impossible to sell to customers.

Many dealers will make the annual pilgrimage to the sales this month in an effort to load up on units while preparing for Tax Season. Although lots of vehicles will get sold through proper marketing, uneducated customers, and even a stroke of pure luck, many will never get sold and will end up back at the sale in the late spring now aged and well below book values. The dealers who bought them will take them back to the auction and feel the real pain of overvalued units bought by un-educated buyers. There is a solution to this problem, but surprisingly, most dealers just don’t think it through.

When is the last time you did a Credit Bureau Analysis in your store to understand the demographics of the customers you are selling? How often do you sit with your desk manager to make sure they know the programs of the finance companies that are loaning your customers money? If the answers to these two questions are not regularly in your store, now is the time to do it.

Most dealers will find that they do a good job delivering people with 650+ credit scores but once they get to the low 600’s and below, their actual delivery percentages drop dramatically. For example, by taking all of the credit pulls in a given month from every customer who gave you a credit application, you can determine what percentage of leads make up any specific credit demographic. If 30% of your total pulls were below 600 credit yet only 5% of your deliveries had a similar score, you have significant opportunity to increase your business without spending any more money. Industry benchmarks are 28% across the board for all credit tiers and most dealers find they are well below benchmark in the sub 600 credit scores.

“You most likely have either a sales process problem or an inventory problem.”

How to fix it? If the problem is inventory, it’s most likely that your vehicles have aged because they do not fit the finance sources for your customers in this credit tier. Take an inventory of all the finance companies you use and then identify common vehicle traits of these particular programs. By understanding what they will lend your customers and the parameters that they use, now you have a significant edge over the “other guys” in the auction lane and you will know exactly when to “Put your hand down”!

The hardest part about buying vehicles for your customers is understanding your finance programs. Learn the programs, use discipline this season while stocking up, and you will reap great rewards this coming selling season. Stop watching other dealers to see what they will pay for a unit. If he isn’t using the exact same finance companies as you and selling to the exact same customers, what you can and should spend has no correlation to what he will pay.

Good luck and good selling!