Navigating Through Today’s Used Car Market – Randy Kobat, Cox Automotive

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At NADA 2020 in sunny Las Vegas, host Jim Fitzpatrick was joined on the CBT Stage by Randy Kobat, Sr. Vice President of vAuto, HomeNet and Rebates & Incentives.

vAutoVIDEO TRANSCRIPT: 

Jim Fitzpatrick: Having a good show so far?

Randy Kobat: It’s an amazing show. We’re really excited to see all the excitement here on the show floor.

Jim Fitzpatrick: I know. Yeah.

Randy Kobat: We’ve had a great number of meetings yesterday with clients at the booth.

Jim Fitzpatrick: For sure.

Randy Kobat: And, everybody’s pretty excited.

Jim Fitzpatrick: That’s great. That’s great. Dealers I think are hitting high-fives going, “We just came off 17 million SAR for 2019, looks like it’s going to be a little bit down on new cars for 2020.” However, the guys at Cox and the others out there, the other analysts said, “We’re just going to be selling a lot more used cars,” so that’s good news. I mean-

Randy Kobat: It’s great.

Jim Fitzpatrick: …. This is good stuff, right?

Randy Kobat: It is. Yeah, yeah. Used cars are really a tremendous opportunity for dealers.

Jim Fitzpatrick: No question.

Randy Kobat: And, we love to help them be more successful.

Jim Fitzpatrick: Yeah, for sure. Here we are at NADA 2020. I know that I recently caught your latest live market view for the first quarter of 2020. You had a lot of data analysis go into that. Talk to us about some of the key takeaways from that.

Randy Kobat: Sure. Our dealers, and our clients, and the dealers in the marketplace really enjoy the quarterly updates that we do to help them kind of maybe see some trends that they haven’t been paying attention to. So, it’s an opportunity for us to kind of just share how we’re seeing the market evolve.

Jim Fitzpatrick: Sure.

Randy Kobat: And, I talk to hundreds of dealers every month, and I hear a lot of optimism, but we’re still hearing some concern, because margin compression continues to be an issue.

Jim Fitzpatrick: That’s right.

Randy Kobat: And that’s why we think dealers, and ourselves, have another gear. And we’re always trying to help them improve, and that’s why we’re really focusing in our theme this year, which is never idle.

Jim Fitzpatrick: Never idle. I love it, that little auto play right there.

Randy Kobat: Absolutely.

Jim Fitzpatrick: For those dealers perhaps not attending NADA, which is a large amount of dealers, obviously the NADA Convention, what should they know? I mean, what are some of the things that they should walk away with?

Randy Kobat: I think the thing that we’re really focused on is on the used car side, for the most part, vAuto has been since it’s founding. And our founder, Dale Pollak, is releasing his fifth book called Gross Deception here at the show. It’s available here at the show and on Amazon.

Jim Fitzpatrick: It’s getting a big buzz out there.

Randy Kobat: It is. And what we saw is, in 2016, we saw a significant change in how the market was behaving. And while margin compression was an issue back then, it really began to accelerate in 2016, 2017, 2018. And so, we try to share that story and we begin to give the dealers, through the book, an opportunity to right the ship, if you will.

Jim Fitzpatrick: Yeah, for sure. And we started to see used car departments running at a negative where that was always a positive situation.

Randy Kobat: First time in history the NADA data showed that used cars actually had a negative total gross profit.

Jim Fitzpatrick: Yeah. It almost forces us to look at the used car department with a different set of glasses, different set of goggles than ever before.

Randy Kobat: Yeah. And it’s really interesting, where we used to have 60 days to really move a car and make a good profit, that window has closed by half. We’re really helping dealers focus on the 30 day window to really move the cars more quickly.

Jim Fitzpatrick: That’s right. Sometimes we’re talking to some recon companies in here and what they’re learning is they’ll go into a company and sometimes the car sits in a… Well, iRecon. They’ll sit. It’ll sit in recon for 12 or 13 days.

Randy Kobat: Absolutely. Yeah.

Jim Fitzpatrick: And the clock’s ticking away on that.

Randy Kobat: Yep. Well, I was talking to a good friend of mine yesterday. He said, “I sold 70. I’ve got 80 on the lot, but I own 90. You know what I’m saying? So how do I get those 10 on the lot faster so I can sell them faster?”

Jim Fitzpatrick: That’s exactly right. Yeah. It’s all about running efficiency. So what would be some of your recommendations? So what advice would you have for dealers grappling with the change process?

Randy Kobat: I think the first thing, in the vAuto history, we’re here to help. Dale, myself, the entire team, we’re here to help dealers think differently about how they manage their used car inventory. And going from really the velocity approach that’s been so successful to a more investment minded approach where you’re really managing these dollars in a more investment minded approach as an investment portfolio so that we can help the dealers improve the margins where that they’re seeing being more compressed.

Jim Fitzpatrick: Sure, sure. Is it one of these things where you just got to break the old mold and dealers are still trying to swallow that pill and saying, “Wait a second. Everything that was told to us before is not necessarily correct in today’s way of doing business.”

Randy Kobat: Not everything. I think that’s the great thing, is that many of the tenets and the principles are still strong and solid. But, like I said, we’re never idle and we continue to innovate. And so there’s ways that you can tweak the edges, if you will. But that’s hard. Just like when dealers first began to adopt velocity, it was a change in mindset and a change in processes and a change in philosophy. And we want to help them make that change again to continue to thrive.

Jim Fitzpatrick: And for so long we didn’t have companies like Carvana breathing down our backs and Vroom and ride share companies that are, I don’t know that they’re stealing much market share, but it is certainly giving consumers a new way to look at transportation and also how they acquire transportation.

Randy Kobat: Absolutely right.

Jim Fitzpatrick: 176,000 used cars were sold by Carvana last year and that came right out of the showrooms, typically, of new car franchise dealers.

Randy Kobat: Absolutely.

Jim Fitzpatrick: Wait a minute. And by the way, it’s 176,000 now. They’re forecasting in five years, it’s going to be 2 million. So, if dealers don’t adapt and change, and I know you guys at Cox Automotive have done a great job of helping dealers to navigate that treacherous river. Talk to us a little bit about that.

Randy Kobat: Well, just like Carvana, right? More than ever before the shopping process is online. And so, we’re here to help specifically with some of the offerings we have from HomeNet to really tailor that experience to create greater engagement. So some of the targeted promotion opportunities that we have within our photo management tools to really have the imaging and the descriptions be more personalized for that consumer when they first begin to get engaged with a car that interests them online.

Jim Fitzpatrick: That’s right. Which is so important, right? Consumers want that seamless process. They want all the information that they can possibly get on the vehicle. When do you think it’ll be that we open up our dealership one day and say, “Wow, the majority of vehicles that we’re selling, as a dealer, are online without even… The people aren’t even coming to the showroom.” You think it’s 10 years away or-

Randy Kobat: It might even be sooner. I’ve got clients that we talked to that are talking about acquiring more stores or opening new lots and they’re debating, “Should I do that with that capital intensive approach or should I just try to sell more cars online and open up my geography that way?” So I think dealers are getting smarter and smarter with the new world with e-commerce, true e-commerce, and it’s going to be great, exciting, a very exciting time.

Jim Fitzpatrick: And of course for the last 25 years, the OEMs have been pounding us saying, “Build a new franchise, build a new mausoleum, this incredible showroom and service bays.” And now here we are, people sitting on their phone, on their couch and saying, “I’m going to have a car delivered to me like a pizza.” It’s crazy.

Randy Kobat: And you dealers can get really targeted with those type of consumers and the different types of geographies that they want to go after. So they can be really intelligent with the marketing tools that exist today.

Jim Fitzpatrick: Yeah. So I want to switch gears a little bit and thank you for all the time that you’ve given me. I want to ask you a little bit about vAuto Solution’s HomeNet. What’s new with HomeNet at the show?

Randy Kobat: Like I mentioned, the targeted promotions is something that we’re really excited about. And then, we continue to enhance and evolve our snap lot 360 solution, which is really the 360 view of the car that dealers are able to take themselves on the lot and get that online to create a more immersive, engaging experience for the consumers. And we really love to think that in order to start that shopping experience, they have to find the car and they have to click on the car. And we want to help that happen.

Jim Fitzpatrick: 360 all the way around. That’s amazing. It really is. You guys are on the cutting edge. I want to thank you so much, Randy, for stopping by. I know you’re busy as hell. So thanks for all the time. And I was over by your booth a little earlier and the place is packed. You’ve got a million dealers over there. For dealers that haven’t been able to make it out, check out HomeNet and vAuto. I know you’re going to likely to see those are two huge names in the industry. If you have any questions, Randy’s available, if you’re here at the show, if not, his team is available to answer any questions that you’ve got. But it’s 2020, so make the necessary changes to get up to speed on the market because you don’t want to get left behind, as a dealer. And why give those cars to Carvana, right?

Randy Kobat: Absolutely. Thanks, Jim.

Jim Fitzpatrick: Thank you so much.

Randy Kobat: Have a great day.

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