What should I look for in a used car lot’s reconditioning costs per vehicle?

Begin with a sample. Pick vehicles sold in recent months, from cheap to dear, and ask for every cost attached to each one, including inspection, repairs, paint, tires and detailing. Compare the totals with what the lot says it spends. If costs are only recorded in lump sums at month end, you cannot tell which cars make money and which lose it.

Next, ask who does the work. In-house technicians raise fixed costs but give control. Outside shops add variable cost and delay. Ask whether the labour of the owner or family is counted at a real rate, because unpaid time makes the margin look better than it will be under a new owner. Your accountant can restate costs with fair labour included.

Finally, check how cost is treated in the books. Is reconditioning added to the value of the car in stock, or expensed straight away? Ask what happens to cars that needed far more work than planned, and how the lot decides to stop spending. The pattern of overruns shows how disciplined the buying side is. Ask for any cars that were returned or came back for warranty work too. Repeat repairs eat margin quietly, and they show whether the first round of work was done properly.

Key takeaways

• Trace every cost on a sample of recent sales, from purchase to sale.
• Check whether owner or family labour is counted at a real rate.
• Ask how reconditioning is treated in the books, and how overruns are handled.