In this interview Mike Cavanaugh and Craig White cover some of the unique challenges that used car inventory managers face today in retail automotive, including how to get the market comparison set for a vehicle just right and Craig’s sound advice for used car managers just getting started on asking for help. See the edited transcript below or watch the full interview.
https://youtu.be/IkLQ6VUHRIs
M: Okay, so I'm Mike Cavanaugh. I'm the Executive Vice President of MAX Digital and I am here today with Craig White. Craig is the Pre-Owned Director at Asbury Automotive and the Founder of Profitable Pre-Owned. Craig, welcome.
C: Thank you Mike.
M: So, before we get rolling here a little bit, Craig, you know, I've followed you for a long time on social media and LinkedIn, I subscribe to your newsletter. Big, big fan of yours. And I'd like to get to know you a little bit better. Maybe you could tell me about your background, how long you've been in the business and how you got to what you're doing today.
C: Yeah, sure. This year is about 35th year in the car business so and I’ve done pretty much everything in the front end of the store, never really wanted to mess with the back end of the store. All the way from sales to sales management to regional F&I Director, General Sales Manager, and pretty much for the past six to seven years, my main focus has just been on pre-owned inventory acquisition, marketing, pricing, you know, that kind of thing. So about six or seven years ago when the opportunity presented itself and I was really interested in doing it because I was, you know, how leadership can be you know, you get the day to day grind and desking deals and all that stuff. I was really ready to give all that up because I was really interested in focusing on this part of business and it's been very fun the last six seven years.
M: Oh yeah, it sure has. I think there's been a lot of changes in the industry the last last six, seven years and now the last probably 90 days or so have been the most exciting, would probably be an interesting word to use, but it volatile is probably a little bit better word to use. A lot of folks out there that I know have questions. You're on social media all the time and reading probably some of these comments that people have and you see the kind of the snarky posts about how much people have to pay over MMR for a vehicle right now, which is the reality we've got right now. So, you know, an expert like you who does this at scale every day and knows a ton about the industry a ton about the used car space right now, one of the questions that I'm curious to find out your opinion on and ask you about is: when you're looking at appraising a vehicle, and let’s look at the most basic aspect of this, how do you decide what range you use when you're looking at the data set? How do you know, when you’re comparing, apples to apples with a vehicle, what type of data points do you look at? How far out do you go to appraise a vehicle? I'm sure it depends on the vehicle as well, but maybe you could help me understand a little bit more about your process and how you look at things there.
C: Yeah, well, it's like you said, certain vehicles, require you to go out a little bit further, if they're more, you know, a rare type of car. You know, and it's all based on days supply and the availability of each individual car in your market, because in my market, it can be completely different than somebody that's in Michigan or any other part of the state. You really have to make sure that you have a really good comparative set. When you're looking when you're appraising a car, I like at least a minimum of 20 to 25. So, you know, you just have to change your distance and get that dialed in to where you get a really good competitive set. There are cars that will really confuse you. And I'll give you an example. There's a company here in Atlanta that they customize these vans for handicap. All right, but so they've got all these late model Sienna vans that they've customized for the handicapped with high roofs and everything else. Well, if you're going to appraise that set and it’s throwing those cars into the mix. And these cars are priced at like $42,000 and $45,000, which is more than a Sienna was worth when it was new. So, you’ve got to make sure. I mean, when I first started looking at these cars, I'm going “there's no way these cars worth this much money.” I figured that out just by going in and looking at the competitive set and that's how I found it then. You basically just had to go in there and remove them, I think there was a trigger that I could remove “handicap access” is what it was. And so, you know, it's those kind of things that you have to really pay attention to. And I see a lot of people that make mistakes, one of the biggest mistakes I see guys make is they'll start deep diving into options. You know, getting really specific about options on cars, like, no Premium Plus, navigation, you know, if you start adding each one of those items into every car, when you're trying to get your competitive set, you're going to get a really bad competitive set, you're going to needle down too far and your car's going to end up really being way overpriced. So that's, you know, that's just some of the basics that I try to do every day, make sure that I get a much broader search. You know, I mean, and you can, you can turn the triggers on and off as you well know and see if it actually affects the price. Sometimes certified trigger doesn't even affect the price. Very much, right? Then you got to make sure that you're, you know, because you're still competing with the independents out there that can't certify a car. And you got to make sure that, you know, by adding just those certified cars in your competitive search, does that really make a, you know, sizable difference in the price of the car, sometimes it doesn't, more than often it does. And it'll bump the price up probably anywhere around $1500 to $1700. But there are those times that it doesn't make any difference at all. So, it's really important that you, move those triggers around and make sure that the competitive set is accurate and what you're looking at.
M: Now, there's a lot of people that probably are new to be in a used car manager or being responsible for their inventory at their store, maybe recently promoted, they don't have the experience that you had and you know, I can remember I grew up going to the auction with my dad and I can remember the days where we had a, you know, a yellow book and a black book NADA and black book in his back pocket and I think my dad still has a wore out piece in the back of his blue jeans from that book. But, you know, data became a big piece of kind of how we price and appraise cars in the industry that had a bit of a learning curve for a lot of people. How long did it take you to really learn this? And at what point in your career did you really figure out some of these things where, Hey, I don't want to get too granular. You know, some of the stuff you're talking about your career, how did you learn that stuff?
C: It was it was seven to eight years ago. Maybe a little bit longer than that about 10 years ago. A lot of the tools like you know, FirstLook and vAuto and all the other tools that are out. There were a lot of them were just coming in the market and they were getting tweaked once they found different data that worked and actually, I used to use Stockwave or the previous version of it, Auction Genius. Yeah, I didn’t even have vAuto, so that's when I really started getting into it. I would also use the Autotrader Scarcity Index, but back then it wasn't integrated in the anybody’s software, you just had to call your Autotrader rep and get him to send you the spreadsheet. So that's kind of how I came up with the formula of the Autotrader Scarcity Index value, which, you know, the higher the index, the better the car is, the more searched it is by consumers out there. It's trying to find cars with real high scarcity index and low day supply. And then once you match those two together almost every time that car would sell extremely quick and make a lot of money. So that's, you know, the example I've always given was the first car I found like that was a 2013 Subaru BRZ it had a crazy high scarcity index I mean, it's only a you know, $14,000, $15,000 car, but it had like a 15 day supply. So, I started buying these things at auction and we've had customers lined up at the door before the car even got back from the auction trying to buy. It's things like that you know. You just have to try it is just a lot of detailed work and a lot of research that you really have to do before you jump on the auction.
M: It’s like a stockbroker.
C: Yeah, exactly. You hit the nail on the head and that's exactly what it is. But you have to really put in the put in the time you know, a day or even two days before you know you target an auction, target cars, get them on your buy list and then you got to go in there and deep dive and do all the research and make sure you vetted these cars properly. Because if you just you know, throw up of a bunch of cars on a buy list and then dive into the auction the morning it starts you're going to get in trouble.
M: So, with all these changes in the industry right now, everything that's going on, what have you done to kind of address adjust your approach adjust your strategy or have you had to change much? As you know, throughout the last 90 day period the market went down came back up and is almost at our at a record high right now, how have you had to adjust your strategy?
C: Well, it's at the highest levels I've ever seen. I've never seen anything like it my 35 years in the car business. Cars are bringing so much money and these guys just keep paying it and keep paying it. What I don't understand is why they're not adjusting their retail prices. They have to be losing money. I've tried to find other ways to source cars, which obviously the best place to do that is your service department. That’s always been true. The front door has always been cheaper, whether it was 20 years ago, or whether it's today. That's a best practice thing that you have to do. It's hard to get a service drive program started. Because it's full time and you have to have guys in there working in every day. Going in or just appraising cars and throwing appraisals up on the dashboard and hope they see it and call you that didn't really work. You have to be actually in your CRM, whatever CRM you use, every one of them have a mining tool, and you know, you go after that low hanging fruit that you can see. A lot of them like, you know, Eleads and the other CRMs, if they bought the car from you, have all the data already. It shows you what how much equity they have and things like that. So, and they're already your customer, so they're not going to give you a whole lot of pushback. We've been sending out email blasts, and that kind of thing saying, “Hey, we want to buy your car.” And basically, the email that I wrote, I explained exactly what's going on today. That wholesale prices are so high right now, we can't afford to buy cars at the auction, so you might as well come take advantage of it. Maybe you can get a car that you actually couldn't afford six months ago, because we're going to put more money in your trade. And with all the rebates and new car incentives that are available, you know, that gap six months ago, might be closed now. And we've started to see it work quite well.
M: That's great. Now, kind of go into the auction side a little bit here. We've had almost a full digital experience only for the last couple months here. You know, have you been buying cars online for many years? Or what percentage of your cars today is somebody at the auction bidding on a car versus just looking at CRS (condition reports) online and proxy bidding these cars or live simulcasting these cars?
C: I couldn't tell you the last time I went to auction to be honest. Sometimes I go just to get out of the store that was prior to COVID-19. But going to the actual auctions and physically buying cars at auction, it's been years since I've done that. So I'm 100% online.
M: Okay. So now knowing that you're 100% online. You know, looking at auctions, there's a couple kinks in the process with some of the layoffs that were done. At some of these large auction houses right now like at Manheim or ADESA processes are a little bit wonky at some of these places, we've got condition reports are a little bit questionable. In some cases, not in all cases, I think that for the most part, they've done a really good job given the circumstances, but knowing that, is it hard to tell you know exactly what's on these vehicles when you're appraising it? Because, you know, some of these packages on luxury vehicles in particular, can make a pretty big difference if you're trying to buy a BMW or Lexus or Mercedes in particularly right? Some of these packages can be there and if they don't have good photos, and obviously the description that you see on an auction website isn't as good as what it would be on one of your dealership’s websites. You know, has that been a challenge lately? More so than in years past? What are you finding right now?
C: Yeah, I mean, obviously, you know, they've been challenged to get the condition reports done as well as they've done in the past, but as far as equipment, like I said you got to put the homework in ahead of time. So, you know, you just copy and paste the VIN. And if it's your brand, it's pretty easy to figure out what the car's got on it. If you're out buying off brand cars, then then yeah, you got to find a way to get the descriptions. It's kind of funny. And it's different in every auction, like you said. You know, sometimes under that manufacturer tab, you know, in a Manheim auction, it's 100% accurate every time and certain auctions like Manheim Orlando's really good about that. But if you go to one of their other smaller sales, sometimes the manufacturer option tab is completely blank. So, you can’t count on that 100% of the time. And like you said, BMWs can get really confused, and Audis as well. There's I mean, there's so many options on those cars that really do make a big, big, big difference. You really have to do your homework. It's not just clicking by, you have to vet every single car.
M: That's one of the one of the features we recently rolled out was, you know, the ability to pull a window sticker while you're appraising a car. So, we know that, you know, the VIN decode is pretty good on some cars, VIN decode is not useless, but it's far less valuable on other cars in any system, right? The VIN decode varies based on the make and the model. How important is that to somebody in a role like yours or even a used car manager at a dealership that's trying to buy cars for their one dealership? How important is having access to that information to make an accurate appraisal? Whether you miss because you don't think the car is worth as much as it is or you overpay because you think it's worth more than it is, how important is having that access to that data today?
C: It's really important. I think that's a great thing that you guys have come up with because as far as I know nobody else has it. You know, there’s other software or tools that you can get that they give you access to that like, um heck I can’t think of it. Like, AutoiPacket. That's what I would do it, I would always go into AutoiPacket, you know, and post it up and get that. stuff. But that's really a great resource to have. And I think that was a really good idea that you came up with that.
M: Yeah, thank you. I want to be mindful of your time here too. But kind of some closing thoughts here. If you're going to give, you know, maybe somebody that's either they're new into the used car manager role, or maybe they're seasoned and they've been in the industry a long time, but they're having a little hard time adapting to the current environment. What are maybe the top 1 to 3 pieces of advice you give to somebody right now in terms of these are the things you need to be focused on if you're running a used car operation? any size?
C: Well, first of all is your inventory levels, your day supply right now. You know, and that's all changed drastically, and those numbers right now are really scary. It's hard to gauge because it's a moving target all the time. My suggestion is never, never stock more than 30 days right now. Okay, I used to do you know 40 days or even 45 prior to COVID you know I'm, I get kind of crazy about the turn. I've always tried to see how high you can get the turn and push that envelope really really hard. You know that the highest I've ever got it at any at any of the stores in the Asbury group was 24. But now, you got to lean it out and but you know, there's some really big problems you can come into when you start trying to run that lean. You know, supply dries up, you're going to be in big trouble, so like,..
M: right now.
C: Yeah, exactly. So, you know, I kind of back off of that a little bit. But for somebody that's, you know, for the seasoned guys, they should be able to adapt. If they're not tech savvy I get it, but you know, there's people that can show you how to use it. I mean, you know, I'm pretty tech savvy, but a lot of the stuff when all this stuff came out, I was still kind of confused on it. All I did was reach out to somebody that knew what they were talking about. You know, guys that train people how to use these tool, use those people as resources, because they can help. With all the different people that I've met in the business, you know, there are performance managers or you know, success coaches using different types of software, almost every one of those different people at different stores, I got some little bit a tidbit of information. That made me better at what I was doing. If you can, this is probably the biggest thing I can recommend to anybody, whether you're, you're, you're new to the business, or you've been in it for a while, is use those guys as much as you can. Because they've all been to school, like I'm sure your guys have, and they've been trained extensively on how to use this software. And when you develop a really good relationship with these guys, you know, for auction sourcing or even marketing or different types of ways you can, you know, increase your SRP, VDPs by just a little bitty minor things you can do to your ad or your pictures. You know, if you just get each one of these little tidbits of information, you'd be amazed at how much better you can operate and that that would be my number one thing for anybody.
M: That's great. You know that one follow up question that you mentioned how important you know the SRPs and VDPs views are and really the merchandising aspect. So many folks in the used car director role are really focused on you know, sourcing and appraising and buying the right cars. And I think for years, you know, time to market and the quality of what the app looks like online was secondary. And even today, I think sometimes it's a bit secondary, but a lot of the focus has been on that lately. Now, I think a lot of folks in your role in similar roles are somewhat becoming digital marketing, you know, savvy or experts in some cases. How important is that piece right now? You know, not only getting the right cars on your lock sourcing the right cars, but getting them online quickly and making sure they look good online.
C: It's, it's actually more important than the buying side. I'm not saying that, you know, the buying side is not important. And if you're buying the wrong cars, I'm not sure it's going to really matter if your descriptions very good. But if you have all the right cars, you have wrong descriptions, bad pictures and bad marketing. People are not going to look at your cars period. So you really should be spending probably 70% of your time marketing the cars, you know, going in and looking to see, you know why that car is not performing well, if it's got the right equipment, the right color, you know, why are people not looking at that car? It's got to be one of one of two or three things, maybe the pictures are bad, maybe there were some damage on the car that when repaired before they took the pictures and you got a big damage on the rear door or something that is all any of the customers see and every time they click on it, they just blow by it. But you know, just things like that. And then, you know, make sure that your descriptions are as accurate as they possibly can. You know, make sure that all the correct equipment’s in there. Make sure you don't have equipment in there that's not on the car, because that will cause you some big issues, you know, you're going to end up buying a car back. So it's really, really, really important in the digital world because that's all that people look at really. I mean, is this the car that they want? They have their needs. And then once they make their shortlist, just like I make my shortlist when I go buy cars, it's knowing that the more information you can give them to make that search easier for that customer, the better off you're going to be.
M: Well, this has been great, Craig, I really am happy we got a chance to meet face to face after talking a lot on LinkedIn over the over the years here but really appreciate learning from you today and looking forward to connecting with you again real soon.
C: Yeah, it's been a lot of fun. Mike, I'm glad I finally got to meet you. I've always looked up to you. And glad we finally got up spend a little bit of time here.
M: Yeah, absolutely. Well, you have a good day. Good talking to you.
C: All right, you too. Thanks a lot.
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Craig White started profitablepreowned.com to share all the things he wished he had been taught early in his career. He brings over 30 years of experience in retail automotive including Pre-Owned Director roles at Ourisman Automotive Group, Audi South Atlanta, Jim Ellis Automotive Dealerships, and currently at Asbury Automotive Group. You can contact Craig at craig@profitablepreowned.com. Read more from Craig.
Mike Cavanaugh grew up in the retail automotive industry working with his father at a dealership in Metro Detroit. He worked his way up from cleaning cars, to sales, management, and was COO of a 28-store dealership group. He’s also served in the United States Marine Corps and was a Director at one of the largest automotive finance companies in the world. Currently he serves as the Executive Vice President at MAX Digital, a Chicago based software company that provides inventory management, merchandising and digital retail solutions to dealerships across America.
