The general narrow-minded focus we all suffer in conducting our day-to-day job tasks helps us forget and neglect the basics of the car business we need to remember. Consider this article a nudge toward staying market-forward as the opportunities and tribulations roll into your dealership.

As I draft this article in mid-March, dealers consider the impact of new federally mandates tariffs against trade nations for which the domestic automotive industry relies on (or finds economically beneficial) for manufacturing, parts supplies, vehicle — and reciprocal trade.

[Note to reviewers and AutoSuccess – will update data here closer to publication date for latest perspective] ]The Dow dropped 2.67% this day, the Atlanta Federal Reserve expects a 2.8%  contraction from first-quarter results, and delinquency rates and payments are rising. The New York Federal Reserve said, “Auto loans, higher car prices combined with higher interest rates have driven monthly payments upward and have put pressure on consumers across the income and credit score spectrum.”

OK, I do not want to be Chicken Little crying the sky is falling. But I hope to encourage you to look at the reconditioning practices of your used car. Why? How that process is managed determines how strongly reconditioning helps push back the margin compression clouding your profitability horizon.

Margin compression is a fact for any business that purchases and sells assets – whether white goods like appliances, nuts and bolts hardware, or new and used cars and trucks.

The easiest way to understand this reality is the squeeze between the price you buy something and the price you sell it for. Margin compression that adds cost to this formula squeezes the margin you need to make to be profitable.

Reconditioning, mainly where the benefits of software-driven reporting, workflow tracking and monitoring, and vehicle appraisal practices work together, is a beneficial tool for running leaner, smarter, and more profitably.

Here’s how well-practiced reconditioning fights margin squeeze:

1. Reduces inventory needed to sell the same level of vehicles: Automated workflow processes get cars from onboarding to sale-ready more efficiently and faster. Reducing recon times by five days equals one more turn of inventory. Less inventory is required to maintain sales because you can recondition more cars quickly (three to five days efficiency is the reconditioning Gold Standard).

2. Smart reconditioning makes everyone’s job easier. When software manages recon, it tracks the steps of this critical workflow, such as how long it takes to move a vehicle from Step 1 to Step 2 and from Step 1 to Step Last. Identify where hangups or habits are wasting time, costing you lost sales and lost margin. Where is unapplied time occurring and burning through margin you might never identify and stop otherwise? These detection and tracking steps run quietly in the background and raise their hand only when workflow efficiency is compromised.

3. Run the math to scare yourself. Holding cost is a major contributor to margin squeeze. Holding cost is the normal accumulation of sales overhead expenses that erode margin: floorplan costs, insurance, and taxes. The smart way to manage holding cost expense is to fine-tune recon to a three-to-five-day time to line. Reducing time to line by half or more (very doable) will result in tens of thousands of dollars of recovered margin loss to your bottom line. Dealerships that have embraced this program have seen an average reduction of over $50,000 in monthly holding costs alone!

Potent final points about reconditioning from Autofinance.com:

Improves Appeal: A well-reconditioned vehicle is more likely to attract potential buyers’ attention online and in person.

Creates Value Perception: Customers will pay more for a car that looks and feels new, even if used.

Builds Trust and Confidence: Buyers are more confident buying an inspected and reconditioned vehicle, as this reduces the perceived risk of buying a used car.