CARY, N.C. -

Some used-vehicle dealers jack up the pricing on their fresh inventory to offset the lack of gross on their aged vehicles.

Don’t do that.

And don’t advertise your vehicles online without double-checking the pictures and descriptions, either.

Unfortunately, those are just two of the many “don’ts” Jasen Rice has seen dealers commit since he started working in the dealer inventory management field about 13 years ago. 

Rice, who is owner of consulting company Lotpop, advises additional “don’ts,” such as: Don’t make small unimpactful price changes on your vehicles, and don’t restart the clock on a car that took too long to get on the lot ready for sale.

Rice will address those and other issues on Nov. 13 at a Used Car Week 2018 session titled, “Top 10 Don’ts of Used Car Inventory Management.”

But raising prices on fresh inventory to offset a gross problem is a top “don’t” on his list.

“When is the best time to make the most money on a car? Everyone would agree that’s when it’s fresh,” Rice said in an interview before Used Car Week. He asks dealers if they want to increase or decrease the odds of selling the vehicle when it is fresh. 

“Obviously, we want to increase it,” Rice said. But by increasing pricing to offset gross, the dealer is actually decreasing the odds of selling it while it’s fresh. 

“They’re going to try to make their profit, their gross, by asking more money for a fresh car, and by doing that, it’s going to decrease the odds of it selling, which then, obviously, [when] it doesn’t sell, they’re not going to make that gross anyway.” 

It could become an aged car because they ask too much too soon, he added.

More ‘Don’ts’ to consider

That leads to another important “Don’t” on Rice’s list: Don’t let your car go longer than two weeks without making a price adjustment. Rice notes that when dealership managers work on inventory price adjustments, they often start with the fresh cars and then move on to the aged cars.

But the 20- to 50-day-old cars fall off their radar. Those cars are no longer fresh or aged.

“When they got rid of 10 old cars on their lot, 10 more came and replaced them, and they never got ahead, because they’re looking at these cars,” Rice said. “Instead of looking at oldest to newest or newest to oldest on their lot, they should be managing it by last price change and not let a car go past two weeks without making some kind of adjustment.”

Another “don’t” on Rice’s list: Don’t wholesale an aged car for less money than you have advertised online. Rice provides the example of a manager who has a 70-day-old car for sale and is wholesaling it or is sending it to auction. When Rice asks the manager how much the dealership plans on getting at the auction, the manager might say $19,000, for example.

“And I’ll say, ‘Your last asking price was $21,000, but you’re willing to go to auction and get $19,000. Why wouldn’t you drop it down to $20,000, or $19,500 or even $19,000 and sell it to a retail customer than wholesale it for $19,000? Because at least if you retail it to a customer, you might get a trade-in that you can make profit on; you might get financing from that customer [that] you’re going to make profit on,” ‘ Rice said. “So by just taking a car and wholesaling it and not looking at where you last priced your car, you’re costing yourself gross.”

A career of correcting ‘Don’ts’

Rice has seen dealerships deal with problems involving gross and commit many other “don’ts” since he started out selling cars on the Web in 1997. In 2005, he worked for software company vAuto, which later sold to Autotrader. 

While working with vAuto and helping dealers with inventory management, Rice saw them struggle with “getting gross and volume out of their inventory.” He knew he could help, so he started Lotpop. 

He began helping clients take care of inventory management tasks that they don’t have the time to perform, such as creating trend reports or viewing every vehicle they have listed online and making sure the vehicles all include accurate photos and descriptions. Rice came up with the company name Lotpop, because he wanted to see attention-grabbing features for dealers’ virtual lots.

“We want them to stand out and pop in the market: their cars, their pricing, their e-mail follow-up communications, [and] just the way the dealership is presented,” Rice said.

Proper pricing is one way to get dealers’ virtual lots to stand out, and that leads to what Rice says is one of his biggest “don’ts”: Don’t price a vehicle at $19,995. Price it at $20,000. Or instead of $14,999, make it $15,000, for example. The reason? That’s how customers shop these days. Rice calls a price such as $19,999 “psychological pricing.”

“It works in print, radio and TV, so I might see or hear something for $19,999, and mentally round down to 19 thinking of the lower number,” he said, noting that a vehicle listed at $19,999 might not show up for an online customer searching in the range of $20,000 to $25,000.

“So you miss those opportunities,” Rice said. “By pricing at $20,000 even, you get to get the 20-and-higher shopper and the 20 and lower, so you get double the exposure on your vehicles. Don’t price it to a 100-year-old strategy that’s been around for a while, because people don’t buy cars on print, radio and TV anymore. They do it on the Internet.”

Dealers should also research how sites such as Autotrader and CarGurus configure their pricing. “Understanding how these sites work and positioning cars at price points to maximize exposure, that’s a big thing,” Rice said. “A lot of dealers don’t consider that, so I would never price a car at $19,999.”

Rice’s company moved into an 1,800-square-foot office space in July and added another 1,200-square-foot office on Oct. 1, so he plans to continue helping dealers learn what they should not do. 

“After a decade of helping dealers, these are just common things that I find dealers continue to struggle with, or don’t do, or don’t realize.”