Move Aged Inventory Or Die

  DENVER CO - 06/15/2016 (PRESS RELEASE JET)

Low turn times are so critical to dealership profitability.

One of the most critical factors directly related to the profitability of your dealership is the speed in which you move inventory, retail or wholesale. You must have a process, or an exit strategy. It doesn't matter how you acquired the unit, trade-in, auctions, direct from consumer, or dealer trade. You just need to know what you are going to do with that unit after it reaches a certain day.

Assume you have an average turn of 60-days. That means you could turn over six vehicles a year from that space. If you net $2,000 per deal, then the annual opportunity cost for each space is 6 X $2,000 or $12,000. Divide that by 365, and you get $32.88 per day. So every day that a car sits over the 60-day average, youre losing $32.88 per day on a unit.

Now, how many units do you have over 60-days in your current inventory? If that space is not filled, what are you losing each day?

Don't be forced to take a loss at auction from a vehicle that ages on you. Instead sell it directly to other dealers without paying transport or auction fees. You can still offer that unit to potential retail customers whiles simultaneously offering it up to over 7,200 dealer members possibly looking for that vehicle right now. There is no reason with todays network connectivity technology that you should be forced to reduce your selling options on an aged unit.

Tips for Moving Aged Inventory

• Analyze your inventory.

The first thing you should do is take stock of where, how and what you paid for every used car on your lot and percentage of units by days in stock. In all likelihood, this inventory analysis will reveal your buying pattern. It will also lay the groundwork for retooling your approach to acquiring future inventory.

• Organize your inventory by its aged status.

While accepted industry practice is 60 days, you’re freezing capital. Thus, your process should include tactics that address cars at 15-, 30- and 45 days and beyond, which should include weekly monitoring of your aging inventory on the Search Results Page (SRP) and Vehicle Details Page (VDP) on your website as well as third-party sites. • Start moving your vehicles.

• Get your cars front-line ready as soon as possible.

Use a tool such as AuctionLink to see how long it will take you to get the vehicle to your website and third-party sites, buy clean retail ready units from the start fully ready to merchandise from the time you purchased it. Coming out of the gate quickly helps drive down days in inventory as well as turn rate for your store.

• For cars at 30 days, detail a selection of your aged vehicles and move them to another location on your lot. Reevaluate your pricing. Start looking at shared profit options with other dealer members.

• At 45 days: • Detail the cars again and move them to the front line of your lot • Go online to see what they are retailing for and check out their wholesale price; adjust prices down accordingly

• Use LiquidationLink to get offers/bids for a car. Reevaluate whether you want to keep the car or dispose of it through LiquidationLink.

• Check your competition view and determine if the vehicle is a fast or slow mover, where the pricing should be on that unit in your market or if the vehicle simply isn’t a good unit for your store. Look at SRPs/VDPs and dealership traffic through your CRM tool to see what kind of activity you’re getting.

• At 55 days, retail remaining aged inventory at above wholesale anticipated gross profit, begin aggressive pricing your aging units in the dealer direct market.

• At 60 days, turn a negative into a positive. According to the NADA, the cost of keeping a used car in inventory is $28/day. Although this varies by market, you’ve likely sunk well over $1,600 per unit for every car that’s been on your lot for 60 days, so it’s time to cut your losses and look to wholesale out of every car that's over 60 days old.