Investing in Recon


Our unique storm continues to linger into 2022 – low inventory, higher vehicle pricing and stronger competition for said inventory. Until the COVID-19 related manufacturing delays get resolved, industry analysis forecasts that used car sales will continue to lead in dealership acquisition, sales volume and service. Furthermore, acquiring inventory will remain a struggle and expensive. So, what can be done to ensure you are achieving higher-profit-margins on your used car inventory?

If we reflect for a moment on the lessons learned from the Great Recession, between 2008-2010, it’s important to recognize that our industry weathered financial storms by being agile and quick to identify new internal revenue opportunities that helped mitigate economic challenges. For example, during the financial crisis when vehicle sales were down and unemployment was high, dealers nationwide adapted by making needed investments in their fixed operations. As the recession progressed, the industry recognized that customers were holding onto their vehicles longer; they were more inclined to invest in service and maintenance, rather investing in new purchases. Fixed operations became a main point of interest for fostering reoccurring revenue.

As pre-owned inventory becomes increasingly more necessary for building inventory, it’s important to evaluate how used car are merchandized, starting from the beginning with acquisition, through the reconditioning process, all to way to the pricing strategy.

Let’s start with acquisition. With used car pricing at an all-time high, making sure you buy smart makes reselling easier. Leverage original OEM window sticker technology to provide the necessary information you need to ensure you are buying smart at the auction and performing an accurate appraisal for trade-ins. Utilize technology that integrates into your inventory management systems (like vAuto or MAX Digital) so you can quickly access VIN specific sticker information at the time of auction; more importantly navigating multiple online auctions simultaneously. Quick access to OEM window stickers will help you better appraise each vehicle prior to taking on the investment.

Every vehicle that you add to inventory, time and money will be invested to get them retail ready. Recon processes, for the most part, have been overlooked as a viable revenue channel within dealership operations. In many businesses, cars enter the recon process without a formal tracking system. At times they get stuck and sit, before being routed to the front lines and no one even notices. If this sounds familiar, how long does it take on average to move your inventory through recon before you start realizing profits? What are your holding costs, and can you assess how much revenue you are losing each day that vehicle sits in recon? From our data, research shows without a recon management software solution, the recon process takes longer than it should. Which means, your holding costs start to multiply, and profits decline.

Just as you did with your fixed ops department in 2008-2010, rethink how you approach your recon efforts. Incorporate a recon solution that will provide:

  • real-time department communications
  • real-time approval management
  • vendor management
  • vehicle tracking
  • automated smart routing
  • streamlined processes 
  • reporting
  • DMS and IMS integration; and more


Consider this, if each vehicle currently takes an estimated 10 to 20 days to move through the recon process and your holding costs are $80 per day, this could equate up to $1600 in lost revenue per vehicle. And depending on the number of cars you push through recon each month; this could be significant revenue you are missing. Implement a recon workflow system that creates structure and streamlines your processes to cut your process time in half. This increase in speed-to-market will give you the ability to capture more revenue sooner, which is more favorable to your margins.

Time is money when we are talking about recon. Being able to capitalize on improved business operations that hold teams accountable and makes them inventory experts, will have a positive impact on your monthly financials. You can’t improve what you can’t measure.

Hugh Hathcock is a 40-year industry veteran with a proven track record for developing products and services that specialize in growing dealership revenue and customer engagement. Hathcock is the founder and owner of Velocity Automotive, a leading software platform that is connecting recon to retail; as well as being the founder of ELEAD1ONE.

You must be logged in to post a comment.