Why Dealers Are Losing Margin—and How to Get It Back

LotTalk Powered by Lotpop
  • October 7, 2025

 

The 30-Day Drop-Off: Where Gross Goes to Die

In Episode 13 of LotTalk, hosts Chris Keene, John Anderson, and Renaldo Leonard tackled a problem that’s hitting every used car dealer right now—margin compression. It’s not just the market tightening; it’s how dealers are managing (or mismanaging) their inventory after day 30.

Anderson dropped the hammer early in the episode: one dealer’s markup averaged $4,688 in the first 30 days, but after that, it plunged to just $65. That’s not an anomaly—it’s the rule. Across Lotpop’s data set, dealers consistently see profit evaporate the longer inventory sits. “Once your ability to make money on used inventory hits day 31, it’s basically gone,” Anderson said, echoing industry veteran Tommy Gibbs.

So what’s the fix? Move 65–70% of your inventory inside that first 30-day window. And that starts long before you slap a price tag on the windshield.


Speed Is the New Margin

From the moment a car hits your lot, every day counts. As Anderson put it, “We’ve got to look at every phase—how are we managing it, and where can we trim off days?” That means tightening recon, shortening photo delays, and making sure units go live online as fast as possible.

Leonard stressed that merchandising speed isn’t just about photos and price—it’s about presentation. “When you get that vehicle in inventory, day one, you’ve got to take the steps to make sure you’re merchandising it effectively,” he said. His rule of thumb: “Show me, tell me; tell me, show me.” If your description mentions Apple CarPlay, show the photo. If you highlight heated seats, make sure the image is there.

Even if a car’s still in recon, Leonard advises getting it posted with a “just arrived” banner. Waiting for perfect photography or a spotless detail just burns retail days—and profit.


Don’t Sleep on Pricing: Watch Every 3–4 Days

Markets move fast, and so should your pricing. Leonard recalled a dealer who priced a car at 98% of the market one week, then saw it drift to 104% the next because the market shifted while they sat idle. “You’re sleeping at the wheel,” he warned. Every few days, pricing should be revisited to make sure inventory isn’t falling behind.

Keene’s advice for those overwhelmed by large inventories? “Start with the cars that have no activity.” Cross-reference your CRM and inventory management tool—units with no leads, no activity, or no movement are the ones dragging your 30-day performance down.


Airtight Processes or Bust

Anderson summed it up simply: if you’re going to shoot for premium prices, everything else must be watertight. Recon should take no more than four days. Leads shouldn’t go untouched for a week. Follow-up has to be meaningful, not robotic.

He also revisited a sales acronym from Keene that helps staff focus on what customers actually care about: S.P.A.C.E.—Safety, Performance, Appearance, Comfort, Economy, Dependability. Instead of asking, “You wouldn’t want to buy this, would you?”, salespeople should focus on why the car fits the buyer’s priorities. A dad shopping for his daughter cares about safety—send him videos, specs, or crash test ratings. Give customers time back by serving them the info they’d otherwise be Googling.


The Hidden Killer: Middle Bucket Neglect

Dealers tend to obsess over fresh inventory and aged inventory—but the 31–45-day “middle bucket” is often ignored. That’s where cars silently slip into the aging pool. Leonard called it “the choke point.” His mantra: “Don’t let anything go past 45 days—come hell or high water.”

Focus on that middle bucket daily. It’s the traffic light that decides whether your lot keeps turning or clogs up.

 

 

Stop Creating Your Own Margin Compression

Keene didn’t hold back: “You create your own margin compression.” When your listings are slow, incomplete, or missing prices, you’re pushing customers to competitors who make it easy. And the competition just got stiffer.

He pointed to Hertz—yes, the rental company—rolling out full online purchasing and partnering with Amazon Autos to retail its massive fleet. “They’re grabbing more of those eyeballs,” Keene said. “If you’re not watertight on your processes, that’s another listing getting thrown in front of your customer.”

In other words: while some dealers are still debating whether banners hurt SEO, Hertz is selling cars through Amazon.


“Call for Price” Is a Death Sentence

Leonard vented about a frustrating trend: dealers still using “Call for Price.” His take? “Who in their right mind would go to a dealer’s website and not be encouraged to figure out how much their vehicle is worth as a trade-in or be able to get realistic pricing?” Keene went further: “You might as well park your cars out back and put up a sign that says ‘Walk inside for pricing.’”

Consumers shop by price and buy by payment. If your website hides both, they’ll find someone who doesn’t. Hertz and Amazon let buyers finance, trade, and schedule delivery—in minutes. Meanwhile, many dealer sites still require a phone call to get started.


The Amazon Effect: Simplicity Wins

When Anderson pulled up the Amazon Autos site, it was clear how easy they’ve made it. “Pick out your car. Take care of your protection plan. Pay for it. Pick it up.” That’s it. The entire process is frictionless.

His challenge to dealers was blunt: “Ask yourself—how easy is it to transact with me?” Most dealerships guard their physical lot like a fortress, but ignore their virtual one. You know who walks through your showroom door, but do you know who leaves your website—and why?


The Real Problem Isn’t EVs—it’s Execution

Anderson wrapped up the episode with a reality check: the industry spends endless energy debating EVs, but “you can have a lot full of EVs, and if your processes aren’t buttoned down, it won’t matter.” Losing margin isn’t about the type of vehicle—it’s about how you sell it.

He and Leonard both urged managers to stop fooling themselves about profits on aged inventory. “You’re lying to yourself,” Anderson said. “The reason you think you’re making money is because your pay plan’s based on gross. But if you looked at your net profit, you’d see a different story.”

Net profit grows when dealers turn cars quickly and stop bleeding gross past 30 days. Everything else is noise.


Key Takeaways for Dealers

  1. Sell 70% of inventory inside 30 days. That’s where the profit lives.
  2. Speed to market equals margin. Recon, detail, and merchandising must move fast.
  3. Merchandising is marketing. “Show me, tell me; tell me, show me.”
  4. Price check every 3–4 days. Markets move daily—so should your pricing.
  5. Focus on the middle bucket (31–45 days). It’s the silent killer of profit.
  6. Ditch ‘Call for Price.’ Transparency builds trust—and sales.
  7. Simplify your online experience. If Amazon can do it in three clicks, so can you.

 

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