Congestion was so bad at Audi Nashua and Porsche Nashua that shoppers at the New Hampshire dealerships couldn’t park their vehicles, and car haulers had trouble unloading.
“You would not believe the complaints we got from our Audi and Porsche customers,” said Warren Waugh, one of the founders of Lyon-Waugh Auto Group, a nine-store chain in New Hampshire and Massachusetts. “Even the employees, who had to park close by off the premises, were complaining. It was terrible.”
The group addressed the traffic jams by creating an off-site location to handle an array of tasks related to preparing used vehicles for resale. It also arranged them for maximum efficiency, developed systems to keep them progressing and synced the purchasing, reconditioning and sales teams around a fast-turn strategy — just in time for surging used-vehicle demand after the COVID-19 shutdowns.
For landlocked stores with no room for outward expansion, crowded lots are a common problem. And dealers are left with few alternatives to solve them. Some move to different locations and hope their customers and employees follow. Some are able to build upward and park unsold inventory in rooftop garages, while others expand their hours and try to manage customer visits through their business development centers.
Waugh took a different approach: He bought a 65,000-square-foot industrial warehouse 2 miles from the Audi and Porsche stores and transferred several of the dealerships’ key operations to the warehouse. At a cost of close to $1 million, the huge building has been outfitted with:
- Eight service bays
- A parts department
- An indoor car wash
- Storage space for about 120 vehicles
- A super-efficient used-car reconditioning operation geared toward getting secondhand vehicles ready for sale and on the front line extremely quickly.
The new center cleared out the congestion. And the emphasis on turning used vehicles quickly paid off in the recovery from the pandemic shutdown. The building, referred to as the company’s used-car reconditioning center, came online in January and was just hitting its stride when the pandemic arrived. After a six-week shutdown that started in March, sales of used vehicles this summer were strong.
Through August — including the shutdown — Audi Nashua sold 836 used vehicles, slightly off last year’s pace. In 2019, Audi Nashua sold 1,546 used, up from the 1,118 sold in 2018 and the 620 sold in 2017. The rapid growth in used-car sales was a major reason for the congestion.
Waugh’s $1 million investment is paying for itself by fattening the stores’ profit margins on used cars, says Ryan LeBrun, Audi Nashua’s time-obsessed general sales manager.
LeBrun, the dealership equivalent of a stopwatch-carrying high school track coach, is constantly monitoring his used-car inventory to get the vehicles through the reconditioning center as rapidly as possible and up to the front line. “I measure everything in time,” he says.
The reconditioning center has four dedicated Audi technicians and a phalanx of reconditioning personnel who replace tires, do brake jobs, handle recall repairs, fix cosmetic defects and clean and detail the vehicles. That crew also includes photographers who take pictures for the store’s online advertising. LeBrun estimates his store spends $1,000 to $1,300 per car for reconditioning. Used vehicles are priced slightly below market value to sell quickly, says Waugh, and the company doesn’t negotiate on price. Sales of service contracts with used cars deliver solid profits that help cover the reconditioning costs, LeBrun added.
Audi Nashua buys slightly more than half of its used-vehicle inventory from auctions. The store employs a full-time buyer who works the lanes scouting out vehicles that have minimal cosmetic and mechanical needs and that can sail quickly through reconditioning.
“Our No. 1 priority when buying inventory is to be as accurate as possible on recon costs and always have an exit strategy for the car. Minimizing risk is my game plan. Ultimately, if you can do that the best, you are going to make the most profit,” LeBrun says. “I use a system called Rapid Retail that measures a car’s timeline and each person’s accountability in the reconditioning process.”
Vehicles bought at auction and shipped to Audi Nashua via truck spend about four days in transit and usually reach the front line in a total of about seven days. Locally sourced used vehicles — from trades, purchases or lease turn-ins — make it through the recon center and onto the front line in just more than two days, LeBrun says. The efficiency of the reconditioning center has helped Audi Nashua gets its average daily cost of holding used vehicles in inventory to just less than $25 per day, about half of the industry average of $50 per day, according to LeBrun.
“The reason why this works so well here is that every single department has bought in. … From when the car is purchased to when it hits the front line, every step of the way is measured in time, and every person who is responsible for the car at that individual step is held accountable by time,” said LeBrun.
No one is immune from that accountability — including LeBrun. “Everything is done electronically. For service work that needs to be approved, the technician looks at the car, he sends a request to parts, parts send it to me, and I make the decision on my mobile phone and send it back to parts. The tech gets the parts, and then the car is repaired and sent to recon and photos,” he said.
Waugh said the recon center serving the Nashua Audi and Porsche stores is the second such facility he operates. A smaller reconditioning center that services the company’s BMW store in Peabody, Mass., opened in 2004.
Says Waugh: “The one thing we learned is that the downtime in reconditioning can pretty much kill you. Once we could streamline that in one facility, we knew we were going to solve a lot of problems and free up space in our main facility at Audi. Your most profitable opportunity with a used car is in the first 14 days after it reaches market. If a vehicle is delayed, it is forgotten by salespeople. Processing quickly and getting that car front-line ready fast means higher profits.”