The Dos and Don’ts of Punch Cars

We're all familiar with new vehicle, pre-owned, and certified pre-owned as dealership categories. In 2018, we have an additional category of vehicles on the lot. Service loaners, CVPs, punch cars, DRAC cars, or whatever similar designation your dealership and OEM choose to call them, are now a part of your dealership operation. While many know the importance of these cars, many dealers still haven't optimized them! The process for marketing and selling them is different at every dealership, and it's critical to your long-term success to develop a consistent system that works for your business.

To get started, here a few best practices for maximizing this additional opportunity:

DON’T

1. RDR the vehicle, take the factory incentive money into “other income,” and when it comes out of usage send it to the used car department for retail sale. By making this the used car manager’s responsibility to dispose of the vehicle at a significant loss (because the current market value is thousands lower than the inventory amount), you are setting yourself up for failure.
2. RDR the vehicle, and when it comes out of loaner service, simply mix it in with the new vehicle inventory while hoping that someone will fall in love with it and buy it. Remember, hope is not a plan. This strategy will often end up with the same punch car sitting on your lot for months, while you continue to hope for a buyer.

DO

1. Create a sustainable plan for selling these vehicles. These cars can be very desirable to many different consumers. Some people are new car buyers, others are used car buyers, some people always buy a demo, and some people will prefer to buy this newly created, in-between segment of vehicles. These should be marketed as good deals on your lot and online and be introduced as such by your sales team.
2. Inventory management. Make sure you include these vehicles in the daily trade walk/stock walk. The trade walk is designed to onboard each trade or acquisition into the system. The stock walk is to help manage the vehicles as they age, not when they age. Make certain they are fully reconditioned, detailed, and ready for retail sale.
3. Marketing management. Create a separate tab on your website, or if you’re a bit more ambitious, create a microsite exclusively for these vehicles. Photograph the vehicles using the same process as your traditional used vehicle inventory. Be sure to include the exclusive nature of these vehicles in your compelling comments and your unique selling proposition. Display these vehicles together, not freely mixed in with your new or used inventory and merchandise them appropriately.
4. Sales production. Make the sale of these vehicles a part of the pay plan and culture of the dealership. If they are difficult to sell at your store, try an old-fashioned printed inventory list for only these vehicles. Examples to include on the list: Year, make, and model, stock number, exterior color, interior color, MSRP, current price, estimated miles, and very desirable lease payments (Ex: for 36 months with $2,000 down, 10,000 miles per year)—For very expensive vehicles you may want to use $5,000 down. You can also include a note stating that 12,000 miles per year leases are an additional $20 per month on every car and for 15,000 miles per year it’s an additional $40 per month. Then, provide the list to all sales consultants and internet/BDC representatives.
5. Other tools. Some additional tools for a well-rounded approach to selling these vehicles include sales training, top of mind awareness in the sales meetings, and most importantly, management awareness in the daily make-a-deal/save-a-deal meeting.

Remember, if you create an effective plan to sell these nearly-new vehicles, you will likely improve your sales volume, create a faster inventory turn, and generate additional gross profit. Something that should be a great motivator for you and your team.
Learn more from Lee and our other automotive consultants by joining a 20 Group, scheduling dealership consulting, or registering for automotive training in our NCM Institute. You'll be glad you did!