For Bill Luke Chrysler Jeep Dodge & Ram, the additional investment in reconditioning and getting its inventory retail-ready and qualified for certification is well worth it.
Jody Knaub — the dealership’s used-car director — emphasized the high expectations consumers often have for conditions of used cars, which can impact the level of investment that’s made in reconditioning.
And those recon costs are particularly high for this Phoenix dealership.
“Nowadays, I think the customer expects a (used) car to be a lot nicer than they did, say, even 10 years ago,” Knaub said. “People are really in a place where they expect that car to be almost perfect.”
In a recent comparison of reconditioning costs for Chrysler stores in the Phoenix area, Knaub said the average recon ticket at his store was around $900, versus a cost of about $450 for other Chrysler dealers in the area.
And that’s even with Bill Luke selling a good bit of current model-year, 1-year-old and 2-year-old used cars.
“If you consider that, you would think that the reconditioning costs, being at the level that we’re at, would be less than average, but that’s not the case,” Knaub said. “It’s actually a lot higher than everybody in Phoenix.”
And with the dealership being an Internet store, it is “price chasing,” as well. So, the dealership has to acquire cars at a low enough price that it can do all the reconditioning it needs too and still meet pricing justifications within its market.
But here’s one pay-off: customers are happy.
In fact, Knaub said that “our customer satisfaction ratings are so much higher because these cars are in good condition.”
When it comes to its inventory of pre-owned Chrysler Group products, the store typically will only keep products that meet CPO guidelines.
That approach and other strategies the store puts into place seem to be working — as highlighted in Auto Remarketing’s “Best CPO Dealers in the USA” issue, Bill Luke Chrysler Jeep Dodge & Ram sold more CPO vehicles than any other Chrysler Group store in 2013.
In fact, its 1,520 certified sales last year were more than 500 ahead of the closest competitor.
And when looking at the investment needed for reconditioning and CPO, there is an interesting focus for the dealership, as Knaub illustrates.
“I think the way that the market is going now, it’s such a price-driven situation that we’ve taken the vehicles and put in the money that we need to get them to qualify at or even above the certification standards, but we’ve started looking at certified as being a great opportunity for the customer to have a good experience with a used car,” Knaub said. “It’s also an opportunity for us to possibly get them back for additional service and so forth, because they bought their certified car here.”
But the most significant area where CPO has helped, he said, is in marketing and branding, particularly with how strong a branding weight the term “certified” cars carries among consumers and how widespread it has become in the industry. It becomes a great branding tool.
“And so, we’ve turned it into almost a volume generator for us, not so much a gross profit center,” Knaub said.
In other words, instead of CPO simply being used primarily as a profit center for the dealership, it has become more of a marketing/branding tool, giving customers value and driving volume for the store.
“Our gross profit margins — our dollar per copy, if you will — are lower than probably what a lot of stores around us run. But we’re the No. 1 Chrysler store in the world, as far as volume. Honestly, it pencils out in making a few less dollars per car, but selling a whole lot more,” Knaub said. “Our profit margins and our bottom line have been dramatically increased.”
He credited a big part of that success to selling service contracts, which can be huge profit centers, he said.
“Just by increasing our volume, it’s more doc fees, it’s more service contract penetration … and all that ends up with a better bottom line,” he said.
Once the car arrives on the lot, the dealership takes a full description of the vehicle, which is photographed immediately. The pictures — the dealership takes six or seven, depending on the car —are posted online prior to completing the car’s get-ready process.
The car is then checked into service, where a team of dedicated used-car technicians performs the necessary work.
There is a recon manager and an assistant, whose “sole goal is to have that car turned out of service in detail in seven days,” Knaub said.
“We’ve given them a cap on how much money they can spend. After that, then they get approval,” he said. “We pretty much let her decide whatever she wants to do anyway just for speed, because it’s so important now for that process to be as quick as possible.”
At that point, the vehicle is moved to the detailing department, then the dealership’s special photo room to shoot up to 30 or 35 photographs of the car (The store actually hired a photographer specifically for taking these vehicle pictures). And once the photography is done, the car hits the lot.