If you want to manage inventory holding costs and bolster your earnings per share, consider how your used car reconditioning operates. When recon is run well, it is dialed in and efficient. Cars get saleready within three to five days of acquisition. Dialed-in means keeping every step aligned with a three-to-five-day time-to-line standard. When you scan the broad landscape of recon processes, a few common traits emerge. The most dialed-in operations have consistent times and roles, handing off each completed recon step to the next phase in the chain from start to front-line ready. Those who use the scoreboard as a monthly progress metric have more consistent three-to-five-day time-to-line. These vehicles retail faster, which means more margin and cash flow are flowing back into your operation.

With 20% margin compression with us again, faster reconditioning reduces inventory holding costs. Well-run reconditioning can reduce holding cost margin erosion by half or more. Managing the recon operation to manage holding costs is a car dealer’s best offense against margin compression. “There’s a pressing need for dealerships to expedite vehicle sales to reduce inventory holding costs,” said Gina Cocking, managing director and CEO at Colonnade Advisors LLC. However, you cannot eliminate holding costs; you can only reduce them by selling cars faster. Pivotal to faster turn is efficient vehicle reconditioning. You add one turn of inventory for every 2.5 days you speed up recon. You manage your holding cost and resist margin compression when you: