Reconditioning

When a dealer acquires a vehicle — from auction, a trade-in, a private purchase — it rarely goes directly onto the lot. The reconditioning process brings it to a retail-ready standard. This includes: a mechanical inspection to identify anything that needs repair, any needed mechanical or electrical repairs, cosmetic work (paint touch-up, interior cleaning, minor body work), a thorough detail (interior and exterior), professional photography, and in some provinces, a safety certification inspection.

Reconditioning can range from a $200 detail and tire inflation on a clean vehicle to $2,000 or more in repairs, paint work, and certification on a vehicle that needs work.

Reconditioning cost is a key input to your vehicle's cost of goods. A vehicle you bought at auction for $8,000 that requires $1,500 in reconditioning has a total cost basis of $9,500 — not $8,000. Dealers who do not track reconditioning costs accurately end up with distorted margin reports that make unprofitable vehicles look profitable.

Tracking these costs also helps you make better buying decisions. If a specific type of vehicle (a particular model year or brand) consistently requires expensive reconditioning, you know to account for that when bidding at auction.

Once a vehicle is reconditioned, your cost basis (acquisition + reconditioning) becomes the floor for your selling price. Price below this floor and you are selling at a loss — a situation that is surprisingly easy to fall into when reconditioning costs are not tracked.

A dealer management system that tracks reconditioning costs per vehicle and feeds them into profit margin calculations gives you accurate numbers at deal time rather than rough estimates.