The used car margin squeeze

Used car operations face unique margin pressure. Acquisition costs are transparent—you know what you paid. Reconditioning costs are controllable—you decide what to fix. But the gap between cost and sale price is where profit lives. That gap is threatened by three forces: competitive pricing (customers shop online), recon overruns (spending more than planned), and delay (holding cost and missed turns). Recon is the lever that dealerships control most directly. Get it right, and margin holds. Get it wrong, and profit erodes fast.

The challenge is that recon is often the least visible part of the operation. Sales gets the spotlight. F&I gets scrutiny. Recon happens in the back. Unless something goes wrong—a comeback, a customer complaint—leadership may not dig in. But the data tells a different story. Recon bottlenecks and inconsistent approvals cost used car departments more than most realize.

The recon profit equation

Used car profit depends on two levers: acquisition cost and reconditioning. Get the car cheap, recon it efficiently, and sell it fast. Simple in theory. In practice, recon is often a bottleneck. Cars sit. Repair approvals drag. Inconsistent standards create rework. Each day a unit waits costs holding cost and opportunity.

Industry benchmarks suggest recon should complete in 3–5 days for most units. Many dealerships run 7–14 days. The gap isn't always visible because recon isn't as tightly tracked as front-end gross. But the impact is real. A car that could have sold in 5 days sits for 12. Holding cost adds up. Fresh inventory turns faster and commands better margins.

Where bottlenecks form

Stage	Common delay	Impact
Inspection	Waiting for tech availability	Days added before work starts
Repair approval	Manager unavailable, unclear limits	Rework, over-recon, or under-recon
Parts	Backorders, wrong orders	Rework and delay
Quality check	Inconsistent standards	Units sent back for more work

Repair approval is especially prone to inconsistency. What gets approved? At what cost? Without structured capture, it's hard to know. One manager may approve $2,000 in recon routinely. Another may cap at $1,200. The result: uneven standards, delayed units, and lost margin when approvals are either too loose or too tight.

The approval visibility gap

Most recon workflows live in a DMS or dedicated recon tool. They track status: in inspection, in repair, ready for sale. They rarely capture why a repair was approved or rejected. Why did we spend $1,800 on this unit? Was it necessary? Did we have a choice?

Decision intelligence applied to recon would capture approval decisions: what was approved, by whom, and for what reason. Over time, patterns emerge. Are we over-reconning certain makes? Under-reconning others? Are approvals clustered around certain managers or days? That visibility enables better policy and faster throughput.

Turning insight into action

Once you capture recon decisions, you can:

Set approval thresholds. Define clear limits by vehicle type, age, or cost.
Reduce delay. Identify where approvals sit and streamline the process.
Improve consistency. Compare approval patterns across managers and adjust.
Track ROI. Tie recon spend to margin and turn. Optimize the equation.

The recon workflow breakdown

A typical recon workflow has six stages: intake, inspection, quote, approval, repair, quality check. Delays can occur at any stage. Intake might wait for keys or paperwork. Inspection waits for tech availability. Quote waits for parts pricing. Approval waits for manager sign-off. Repair waits for parts or bay space. Quality check waits for a final walk. Mapping your average time-in-stage reveals the bottleneck. For many dealers, approval is the hidden delay. The shop could move faster, but approvals sit in a queue. Decision capture doesn't fix that by itself—but it creates visibility. When you see that 40% of approvals take more than 24 hours, you can act. Maybe you need delegation. Maybe you need clearer limits so routine repairs don't need sign-off. The data guides the fix.

Quantifying the cost of delay

Holding cost is real. A $25,000 used car at 8% floor plan costs roughly $5.50 per day. Seven extra days in recon equals about $40 in pure holding cost—and that doesn't include opportunity cost. A car that sells in 5 days frees capital for the next acquisition. A car that sits 12 days ties up that capital. At scale, the difference is meaningful. A lot turning 80 units per month with an average 7-day delay vs. 5-day could be holding an extra $50,000+ in inventory at any given time.

Add to that the margin impact of inconsistent recon. Over-reconning—spending more than necessary to prepare a car—eats profit. Under-reconning—skimping on repairs—can lead to comebacks, customer complaints, and lost repeat business. The sweet spot varies by vehicle, market, and price point. But you can't find it without data. Approval capture is the first step.

Integrating with existing recon tools

Most dealerships use a recon module in their DMS or a dedicated recon platform. Decision capture doesn't replace these. It adds a layer: when a repair is approved, the system prompts for a reason. Brakes, tires, cosmetic, mechanical, other. The approval still flows through the existing tool. The decision layer simply captures the "why" that most systems leave blank.

For dealerships using spreadsheets or manual processes, decision capture can be even more valuable. It creates structure where none exists. Over time, the data reveals patterns that inform policy. See how DealerInt works with your stack.

Approval authority and delegation

One of the fastest ways to reduce recon delay is smart delegation. Not every repair needs GM approval. Define tiers: routine repairs (brakes, oil, filters) up to $X can be auto-approved or approved by shop foreman. Medium repairs ($X–$Y) need service manager. Major repairs (over $Y) need GM. The thresholds depend on your operation. The principle is the same: push approval authority down where it's safe, reserve escalation for exceptions. Decision capture supports this. When you see approval patterns, you can identify which repairs are routine and which are edge cases. That informs your delegation structure. Over time, you can expand authority for low-risk categories and keep tight control on high-risk ones.

Case study: reducing recon cycle time

A used car operation with 60-day supply was struggling with 10-day average recon time. They implemented approval capture with mandatory reason codes. Within 30 days, they discovered that 40% of approvals were waiting on manager sign-off for more than 24 hours. The bottleneck wasn't the shop—it was approval latency. They streamlined the approval process, added delegation for common repair types, and reduced average recon time to 6 days. Turn improved. Holding cost dropped. The data made the problem visible.

DealerInt can capture approval decisions in recon workflows. Learn more about our features or start a trial.