In the motor trade we often encounter situations which test our resolve and patience to the maximum and may even make us question why we continue to work in this mad business. Of course there are customers we never forget and dramas we try not to remember, but a lot of the dilemmas are also self inflicted as this true story surely indicates.
We obviously cannot mention names in order to protect the innocent and mostly the very guilty as the main protagonist didn’t just end up with egg on their face but rather an entire omelette. This story highlights the lethargy that is often experienced when someone made responsible for managing large amounts of someone else’s money takes their eye completely off the ball.
Most car dealers in the UK operate some form of stock management ageing policy, the idea being that to use working capital wisely the ‘stock turn’ (or the amount of times per year that the same money is used to buy another car) is closely managed to ensure the financial health of the car dealership. Because most of their forecourt stock is funded by the banks this is costing them on a daily basis so by turning stock around quickly they are minimising the costs involved in stocking that car and increasing the chance of making it a profitable sale.
A good stock ageing policy is between 60 and 90 days and if a car is not sold to a retail customer in that time then it can, and should, be disposed back to the trade in order to replace it with something else which will hopefully sell within that time frame.
As a customer this is where it can sometimes be confusing as most good dealers will constantly review their pricing over the course of that cars tenure on the line up. This is done in the hope that eventually, as it becomes the cheapest on the net for example, it will flush out a customer. By doing this they will minimise any losses by being realistic in what they can ask when a car is reaching the end of its time at that dealership.
Like any of these policies however they are only as good as the staff employed to operate them. The good ones are very good and the bad ones, like the example I am about to recount are very bad.
Here is the scenario; a branch within a smallish dealer group buys in a car, a convertible to be more accurate. The car is bought at a premium because the sun had been out from behind the clouds consistently and there was big demand. OK so they paid top dollar for the car unfortunately but this has happened to all of us at one time or other.
Once the car was put through the workshop and the techies had a closer look the car needed £1,500 spent on the electrics and other mechanical issues just to bring it up to retail worthy standard. Obviously the car had been bought in haste and the correct due diligence hadn’t been performed and it hadn’t been checked perhaps as thoroughly as it should have been. Still, again we’ve all been there and these sorts of mistakes happen all the time.
At this point a decision needs to be made; does the sales manager just wipe his mouth, as we say in the trade, dispose of the car back into the trade and accept that there is a possibility he may not get his money back or does he take the chance of fixing it and selling it at a profit within 90 days before the sun returns to its usual hiding pace again?
It is a dilemma faced up and down the country daily and managers are paid to make these hard financial decisions, and as long as they get more right than wrong and at the end of each month they have produced a positive result then it will be put down to experience.
This case however just shows what happens when neither of the sensible options are chosen and instead the “let’s pretend this situation is not happening and it might go away” method is adopted. In other words the car is cleaned and put on the front and if the car sells we do the work and if not we get rid of it at 90 days potentially costing us thousands.
Let’s say, for arguments sake, that the car was originally priced up at £15,995 which was by far the most expensive on the web for a cab of that age, specification and mileage. The sales manager taking into consideration that the car with a warranty and all the remedial work carried out was going to cost nearly £2,000 simply added that amount on to the usual retail price and hoped to get lucky, which of course he didn’t. He also didn’t bother price reviewing the car regularly or discussing with his sales team to focus on selling what was potentially becoming the 600lb gorilla in the corner.
He had two other branches within his group who also listed his cars on their sites in order to represent the group stock which all three dealers carried to offer their customers more choice. Unfortunately not wanting to lose face he declined to discuss with any of the managers at any stage the fact that the car was a potential banana skin so that they could all focus on resolving the issue.
So we now have pig headedness, arrogance and a “let’s roll the dice” attitude added to the mix so, of course, the most expensive cabriolet of its type in the land sat gathering dust and duly reached 90 days. At this point it had naturally depreciated and of course now that the summer was well and truly over it had fallen even further.
The manager, now under extreme pressure to dispose of the car, was forced to take panic measures and asked some trade contacts to give him a price which they would reasonably buy the car at and eventually accepted a bid which meant the car lost him £3,500. Ouch! An expensive lesson and had it ended there and then there would have hopefully been nothing more said. But of course things were far from over.
The sales manager, obviously still licking his wounds, forgot to take the car off sale on the website and other sites he advertised it on and a few days later the inevitable happened and a hot buyer wanted to negotiate a deal on the car as a present for his wife as it was “exactly what she wanted”
The sales person explained that the car had actually been sold but that he would look out for another as soon as possible and let him know if one became available. He explained what had happened to the sales manager who rang the group buyer to ask him to keep an eye out for a similar car to fulfil a customer order.
In the meantime the trader who bought the car and discovered how much work needed doing decided that, with the autumn upon us, it might be more prudent to put it through the auction and get his money back, after all he had acquired it for a good price and was confident of at least not losing any money.
Of course when the car went through that day the group buyer was flicking through his notes and noticed a convertible going through the sale which seemed to be perfect for the customer he’d been told about. He promptly rang the sales manger to explain that there may be a car he could buy to fulfil the order and they called the customer and explained that they could buy a car and was he still in the market for one which of course he was. He would not, however, leave a deposit until he had seen the car for himself but if it was as described he would be keen to agree a deal with his wife’s birthday fast approaching.
The sales manager now had another decision to make; should he buy the car and hope he sold it and take the chance that if it didn’t he may have another expensive cabriolet on his forecourt at the wrong time of year?
He decided to get the group buyer to go for it but set a ceiling on the price they would pay for the car to ensure that the deal would still be profitable.
Of course the auctioneer saw our buyer getting all excited and ‘trotted him’ i.e. created the impression that there were other bidders in order to enhance the price (trust me it happens all the time). He duly bought it but paid over the odds in the knowledge that they had a ‘live’ customer for it and was happy with the car.
He decided that time was of the essence so he delivered the car to the dealership personally and instructed the sales manager to appoint his prospect as soon as possible.
On arriving back at the dealership the sales person was waiting to take the keys and run it through the wash bay for a clean to await the customer and it was at this point that the valeter checked his dockets and started to scratch his head. He realised that he had cleaned this car 3 times in the last 3 months but couldn’t understand why it was back at the dealership. He cleaned the car as he had been told to, figuring that the sales guys must know what they are doing and he wasn’t paid to think.
The customer came down and drove the car but on close inspection decided that the car was not quite what he wanted and however hard the sales guy tried to push him with all kinds of incentives he wouldn’t buy the car.
Disappointed the salesman went to give the bad news to his boss who couldn’t believe that he had another expensive cab at the wrong time of year when he had just lost thousands of pounds on another.
You can only imagine the stark terror on his face when he saw the car and realised he had actually re-purchased the same car for more money and the work still hadn’t been done on it!
In the best traditions of Basil Fawlty he went into complete meltdown when faced with the reality of explaining the catastrophic chain of events to his superior and realised that the whole sorry saga sadly assured him a lifetime of ridicule and lack of career advancement.
The moral of the story? Make a decision and take your medicine, the value of a car rarely rises and by doing nothing the pain just keeps getting worse.