Conventional Wisdom is a term used to describe ideas or explanations that are generally accepted as true. In the used car industry, the conventional wisdom is for a used car manager to avoid having their front line inventory become too old by any means necessary. While there are several weapons in any dealership’s arsenal to get rid of aged inventory, one of my favorite techniques is Swapping. However, most General Managers, GSMs and Used Car managers draw the line at swapping their vehicles for other vehicles.
To these swapping naysayers, I simply say, swapping is a perfectly reasonable way to help manage severely aged inventory. Is it a perfect process, and will you receive perfect cars? No. But chances are good that the car you are getting rid of is not perfect either.
Swapping is different than purchasing used cars. For those few of you who do not know what “swapping” is, it is the act of exchanging vehicles, (typically these units are front line ready) for the same number in a particular guide. In other words, each dealer involved in the swap would receive “Clean Book” for their car, while paying “Clean Book” for their counter party’s vehicle. This process helps the dealership receive the maximum amount for their aged unit and buys the dealership more time to liquidate the problem vehicle.
Here are several tips that can make your swapping experience much less painful and much more enjoyable….
Use a wholesaler. Yes, a wholesaler. Sometimes wholesalers can be a valuable asset instead of just being “the guy who calls and annoys you all the time”. Swapping vehicles is a perfect use for a wholesaler. Sure, you could go walk some other dealer’s lot, and they could walk yours, but that is often difficult to do since a used car manager’s time is already stretched thin with commitments. Further, so much of the used car business is relationships. Many wholesalers have fantastic relationships with a collection of dealerships, so take advantage of the wholesaler’s relationships. Plus, let the wholesaler walk the lots, and do the leg work
.
But keep in mind, this activity is work for the wholesaler, so they should be compensated accordingly. Typical fees for swapping range from $150 to $250 per vehicle, depending on how the vehicle is transported.
When swapping vehicles, make certain both parties are using the same dated book.
Write the car back down after the swap so you remember the aged unit that was tied to the new unit.
Do NOT pay out anything until the swap has completed through its entirety. If you give your used cars an inspection, process the car through the inspection before cutting a check. Further, make all parties aware of this before the swap starts.
When swapping cars, it is advisable to use vehicles that have a big book.
Do a good inspection when receiving swap inventory. There is usually a reason a vehicle has become an aged unit. Don’t accept a vehicle with too many problems, but accept the fact that swap vehicles will have some issues. They might have too many miles, or be a bad color. Remember, there is a reason the vehicle became an old aged front line vehicle.
Once the newly swapped for car becomes a frontline unit, price the vehicle to move immediately. Plus, any further incentives that will help the vehicle sell, such as spiffing the sales force, should be applied immediately. Remember, this is still an aged unit.
Lastly, it is important to be realistic about the goals of your swap. You are performing this action to merely buy your dealership more time to sell an aged or a problem unit. Swapping is not inherently good or bad, it is simply a tool that expedites the removal of aged inventory.