Take Control Of Your Inventory And Maximize Profitability

[Mike Whitty]

Consumers today are turning to pre-owned vehicles as viable purchase options due to the changing economy. Dealers can take advantage of the changing market by optimizing and managing their used car inventories to sell more cars at the right price, increase the number of turns, and improve profitability on every deal. Here are a few recommendations:

Assess your inventory.
Get to know your inventory by analyzing every vehicle, including those on your lot, those you accept as trades, and those you plan to wholesale. Identify the models, categories, and price points that sell profitably and quickly at your dealership.

Get a handle on aging.
To increase your number of turns, it helps to develop an inventory aging policy. Any vehicles you hold over 60 days have been through two book drops in value before leaving your lot. Measure the performance of vehicles in inventory (equity reports) against book, auction, and your local market. Identify vehicles that fall outside of your core and implement a stricter days-turn policy for them. Be open to re-pricing those cars quickly if they aren’t moving.

Make the smartest trades.
Making the best trades for your store is imperative. Put a remarketing strategy in place to assess trades before you own the car. Ask yourself how well that model has performed on your lot in the past, how fast it has turned, and know its current market value. Look at market trends, such as the increased demand for fuel-efficient vehicles, and decide if you can move the inventory quickly.

Get a good mix going.
The mix of vehicles on your lot can make or break your bottom line. Identify vehicles that have performed well for you in the past and know what the local demand is. Have a sound buy/sell strategy that includes: expected gross profit, days to turn, ROI, average cost of sale, and seasonality. Then use that information to maximize your advertising opportunities and leverage trends in your local market.

Define your appraisal process.
Having an established appraisal process in place will ensure vehicles are appraised properly, which should result in increased win rates, improved ROI, and more competitively priced vehicles. Such a process can also help to avoid poor appraisals that can result in the opposite.

Industry data, along with your specific sales and inventory history, can help you stock the best mix of vehicles. Consider using an inventory management technology solution that facilitates analyzing your past performance while also incorporating real-time retail pricing data, so you can strategically and proactively price your used cars for maximum sales. Using a technology solution that provides access to critical inventory and appraisal information can help you follow through on these recommendations.
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Raj Sundaram is the senior vice president of dealer solutions for DealerTrack, Inc. He is responsible for developing a solutions-based approach to products and services that enable dealers to maximize profitability and efficiency in their sales and finance process. He can be reached at 877-531-9803.