Steve Miner of FirstLook looks at
1. Show me the data: Looking at your current market inventory and historical market data are the starting point. What’s your Market Days Supply? How are the listings in your market?
2. Unit cost does not matter: In this day of transparent data from the internet, customers don’t care what you paid for the car. Taking all the right steps to bring the vehicle in at the right cost determines whether you make a good gross profit. There’s also the question of whether you’re going to charge for reconditioning or not.
3. Not all used cars are created equal: Another key to success is determining which cars are “commodity cars” and which are “gross cars.” You’ll be making significantly smaller front end gross profit on a commodity unit. They may not be easy to find, but a gross unit is where you recapture that margin
4. Price to sell: Look at your market to determine the right prices to reach “probability of sale” on the commodity side, and maximize your gross margins in those spaces where there is really not a lot of competition.