Reid Rubenstein spent 11 years in the wholesale business, gleaning everything he could about buying and selling cars for a profit. Each market tidbit he picked up helped satisfy his appetite for increasing the margin of every unit he handled.

For much of that period, he was traveling back and forth between California and Colorado learning which vehicles could be snagged at a low price in one area and resold in another at a good markup. Keeping his eye on fluctuating prices translated into good returns as he played one market against the other.  When the time came that Rubenstein decided to go into the retail side of the used car business, he kept working that edge.

Today, Rubenstein counts his wholesale education buying cars as one of the key ingredients in his formula for success.  “I do all the buying,” said Rubenstein. “That’s one of the things I’ve never let go, making sure you own it right. I go to auctions three days a week. A lot of new car dealers sell what they trade for and they put too much money in trades. I buy 95 percent of what I sell. I don’t trade for it, so I can be very selective.”  That approach has paid off. Rubenstein boasts of the largest average margin in his dealer twenty group. 

However, Rubenstein’s transition from wholesale to retail was challenging. When he set up Car City Superstore along a lot-heavy stretch on South Havana Street in Aurora, Colo., Rubenstein spent six hard years going head to head with every other dealer in his part of town. Then, he changed course.  “That’s when I woke up and found a way not to compete with them, to develop my own niche,” said the dealer.

Rubenstein now concentrates his work in Special Finance. “We don’t market price or payments,” said Rubenstein. “We strictly market credit from the D-minus customer to the B customer, from the deep sub prime to the non prime. You have some prime walk-in traffic, but that’s not who we market to.”   This decision helped him distinguish his operation from the Havana Street pack and boost monthly sales from about 30 to a range of 100 to 150.

To reach that level of sales, Rubenstein has to turn up to twice the number of vehicles on his lot every month. On any average day, a visitor will find about 70 vehicles out front and another 15 to 20 in the back being reconditioned.

To keep up that kind of a turn rate, Rubenstein has to have the kind of vehicles his customers are looking for. That’s another reason for keeping control of the inventory flow.  “We have a niche in sport utilities,” said Rubenstein. “Some are slightly higher on miles. We sell ‘03 Trailblazers and Explorers with 70,000 miles. We can buy those cars at a good price.”

They sell fast, too.  Here’s how he works: 

Let’s say Rubenstein buys a car with a $10,000 wholesale book value. The non prime lenders he works with will advance up to 140 percent on that amount. He’ll sell the car for $12,500 with a thousand dollars down. However, if instead of paying $10,000 he can get it for $7,500 or $8,000, he can drop every dollar he cuts out of his wholesale price directly to the bottom line.

“You just have to work real hard to buy cars,” he explained. The key is finding what is selling at those prices at that time. It’s a technique that requires considerable discipline.  “Right now sport utilities are high in this market and I can’t buy them, even if I’d have to pay book. I went to auction today and bought one; I’ll wait until that inventory comes down in price.”

Rubenstein stays focused on buying.  “I don’t do any selling,” he added. “Oh, once in a while I’ll work the desk on a Saturday.” After he’s concentrated most of his efforts on buying the right vehicle at the right price, he depends on his sales process and his salespeople to take care of the rest. That means having the best people he can get and a regular training program to keep everyone working at peak performance.

“We train every single day, 15 minutes a day before their shift starts. We focus on selling skills and prospecting, advertising follow-up and asking for referrals. It’s important to get help. We also bring George Dans in four times a year and we do a 3-day seminar with all employees in sales; that’s eight sales people and four managers and five full-time BDC people.

“The BDC handles all of the leads,” said Rubenstein. “Leads are funneled into a customer relationship management program we have. Our people in the BDC do not sell cars. They strictly set up appointments.” His 800-number is answered by a live operator round the clock, and those leads get distributed evenly.

To complete a swelling number of deals requires a long lineup of finance sources willing to step up for credit-challenged customers.  Car City Superstore can call on a list of almost 50 banks and credit unions to do business with. However, there are 17 select finance sources that he places most of his loans with.  “You have to treat finance sources well,” cautioned Rubenstein. “Your relationship is gold. Make sure they don’t have first-payment defaults. You don’t need to forge documents ... It gives us all bad names. Give them good quality deals and keep all finance sources happy. I’ve even bought first payment defaults back.”

Over the last six months, Rubenstein has begun to make some big changes in how he promotes his business.  “We use radio and now we’re starting a 30-minute infomercial on broadcast television. We’ve been doing it 30 days and we think in another 30 days we may go exclusively to television and drop radio. It’s way more efficient.”

Just a few months ago Rubenstein was skeptical about transitioning to that kind of marketing approach. That’s something he’s argued about for years with Greg Goebel (a leading dealership consultant and trainer), who kept urging him to give television a try. Even now, he can’t explain exactly why it works, but he’s seen the numbers and isn’t arguing with Goebel about the results anymore.  “I don’t have an answer,” he confessed. “Radio is effective, but if you put the right message on your television, it will generate more leads per dollar.”

Rubenstein knows that because his business development center tracks every lead that comes into the dealership. He also knows exactly which leads produce sales because a report is e-mailed to him at the end of every day.  It doesn’t take long for the trends to start jumping out. You learn what works and what doesn’t and can avoid making bad decisions on marketing based on false perceptions.

“Here’s an example: Advertise on a hip-hop station, and you can generate more leads than you can imagine in the 18- to 25-year-old demographic. It’s mostly single males and females that don’t make a lot of money. You get more leads than you can imagine, but at their age and their credit situation; the closing ratio is extremely low.”

“Here’s another example: You can go on TV and advertise bad credit, zero down and you’ll have more responses than you can call, but 99 percent of them can’t buy a car. And then they’re very upset with you. You have to be careful with that.”

Once he has a lead, Rubenstein is careful to follow up swiftly. There’s a script and a formula, but he’s careful to tailor it.  “We don’t pull credit until the customer is on the showroom floor, unless the customer lives more than 50 miles away. Then we’ll pull the credit first. You don’t need the heat after they drive 100 miles and are told they can’t buy.”

Doing the groundwork in advance is essential to closing.  “Our policy is to bring them in and get them to the showroom floor with their stips. They need to know what to bring with them; a driver’s license, pay stub, phone bill, references and a check book. It’s so much easier. Then we qualify them when they get here.”

The next step requires some careful steering.  “You never, ever show cars until you know what he can buy,” said the dealer. “You can’t switch them later. If they see a 2003 Suburban for $20,000 and can afford a ‘98 Explorer for $5,000, you can’t switch off the Suburban. Know what the customer can afford, what banks buy and give your sales person that direction. Give them four, five, six choices, but walk your customers right to the cars.”

Having that kind of a system is essential for any dealer that wants to grow his business. Rubenstein has enough experience at this point to also understand that success demands an ability to adapt.   “We’re learning every single day. The business changes, the market, customers, finance sources change, and you have to keep learning and changing too,” said Rubenstein. “Technology changes. Look at what we accomplish on the Internet compared to just two years ago.”

To help drum up good Special Finance leads, Rubenstein set up MileHighCredit.com, which is designed to attract credit-challenged customers. They can scroll through the inventory, fill out a credit application or dial an operator direct at 866-MILEHIGH. The leads he harvests from the Web are added to the CRM in real time. Younger customers also like the idea of being able to text message from their phone.

“Cell phones make it easier to reach people. Many don’t have land lines, especially in that demographic. That’s the way things are going; land lines will eventually completely disappear.” 

“Learn, adapt, keep moving,” said Rubenstein. “Any growing business is a work in progress, and growth is what Project 200 is all about.”

Rubenstein believes that at peak performance, he can push his 70-car lot to turn at a rate of almost three times a month with 200 sales, hence the name Project 200. He’s given himself a one-year period, until November 2007, to get there.  “We keep getting closer and closer and closer,” said the dealer. “Everybody has to see the vision, understand it.”

Ultimately, expansion may require him to change the way he works. He may have to hire someone to help buy vehicles. He may, at some point, need a bigger lot. “It is a lot of work. When you stop doing the work, your business stops performing.”   Rubenstein isn’t afraid of change; he embraces it.

Vol 4, Issue 3