Prepping for Profit
Open the way to dollars down the road.
Although prepping used cars for sale may not make you a millionaire, it can certainly open some doors.
“It may not be the gravy that you want right away, at the end of the day, it’s a way to build a relationship with your local dealers in order to get other work referred to you,” says J.R. Martino, General Manager at Budds’ Collision. “It builds the bridge for them to start referring collision work and more lucrative jobs.”
Vehicle reconditioning involves spot repairs, like painting one or two panels. “It’s a lot of polishing,” observes Martino. “Used car dealers like to cut costs wherever they can, by polishing or using paintless dent repair. That’s something we offer as well. When you start getting into material with paints and primers, costs can go up.”
Another common job is refinishing and reconditioning wheels. “When these cars get purchased at auction or off lease, they have a lot of road rash on the rims,” says Martino. “We offer refinishing on those as well. It doesn’t take much to paint a rim, to just give it a facelift to make it more presentable on the showroom floor.”
Used car managers want to maximize their gross on the vehicle. “Every dollar they put into reconditioning that car is off their gross,” says Martino.
He says that it’s part of the give and take of any relationship. “You don’t want to be that body shop that just takes and doesn’t give,” says Martino. “For a proper relationship to work, you need to give and receive. So even though you’re not making huge profits on certain work, the payback is tenfold when a customer gets into a collision and they refer them to your shop.”
While the used car market may fluctuate like anything else, reputable dealers always do brisk business. “At Budds’ we’re constantly selling new and used, constantly moving cars over the curb,” says Martino. “It may get a little stagnant at times, but now that the dollar is going up, there are more used cars out there.”
When you have more cars, there are more options for the consumer. “Is the consumer going to purchase a car that looks all beaten up, right from auction that hasn’t had any recon work?” asks Martino. “Or are they going to opt for that car that had the spot repair doe and the polishing done, and at minimal cost, make it look much better?”
But he emphasizes, it’s spending face time with the dealers that is important. “Drop by and show some face,” says Martino. “Explain to them what you do. You want to talk to the decision maker, the used car manager. Maybe provide some menu pricing so when they go to the auction, they have an idea of what it’s going to cost to recon the car once it’s been purchased.”
Martino favours menu pricing for that exact reason. “Even if they purchase a car at an online auction, which is more common these days, they have a rough idea of what it will cost to get it into the condition they want to sell to the public.”
One of the pitfalls that Martino cautions against is doing rust. “Unless you’re sectioning panels, you’re never going to completely get rid of that rust,” he says. “When you’re sectioning panels, nine times out of ten, you’re going above and beyond what the manager wants to spend on that car.”
“If you do rust work, do it with a grain of sale, knowing that it’s not guaranteed.”
Setting up a separate area or lane to do rapid repair is the way to deal with recon work, according to Richard Marsh, operations manager at CSN Brimell. “It can be pretty lucrative, depending on how you set it up in your facility,” he says. “Even though it’s low cost, you’re doing anything from $200 to $500 repairs.”
As an example, he notes that recently, CSN Brimell did a lot of minor damage repair for a large fleet company. “The dollars were low as opposed to doing collision repair, but the volume was good. Also, the gross profit in those repairs are higher than some of the major repairs because it’s mostly labour. It’s a known fact that the more labour you have on a repair, the higher the gross profit.”
“So you may be repairing things from $200 to $500, but the actual profit of that job is higher than something you would have done for $6,000 or $7,000 on an insurance claim.”
Most independent collision facilities will have relationships with dealers. “We work with them on a daily basis, purchasing parts and services through them,” says Marsh. “I buy a hundred thousand dollars worth of parts from ABS dealership, and then they send me the work because they don’t have their own collision repair centre.”
But when it comes reconditioning used cars, dealers want it fast and they want it cheap. “They want to keep the cost of reconditioning down so they make more gross profit when they sell it,” says Marsh. “When you’re in that market, you’ve got to be very competitive. And they want it back right away so they can get it on the lot and sold.”
For that, Marsh recommends having a facility set up for it, and using apprentices. “You need a couple of dedicated younger guys, you don’t really need seasoned master technicians doing small bow-ins and little touchups here and there.”
Jeff Pabst, general manager and partner at Pfaff AutoWorks Inc., says the biggest struggle in reconditioning used cars today is dealing with the technology. “To remove a bumper on a car, you need to recalibrate it, and the used car dealers don’t always understand that,” he says. “It costs a lot more. Some of them are not up to speed on the technology and don’t understand the importance of it.”
He finds that 80 percent of repairs on prepping used cars are front or rear bumper, or rim refinishing. “Any one who wants to get into this part of the business should understand the product they’re working on, and have the right procedures in place to handle the technology. It’s a double-edged sword, but it can be profitable if it’s structured appropriately.