Risk Assessment - Technology Can Help

September 2006, Auto Dealer Today - WebXclusive

by Mark Rankin - Also by this author

The easiest way to sell your inventory is to already have what customers want when they walk onto your lot. It sounds simple, but there are pitfalls. Companies have tried various ways to show customers the “right” cars, but many of the methods do not support individual dealership goals. For instance, some automotive Web sites drive consumers to any dealership that has the make, model, miles and color requested. That works great if you own the dealership with that particular vehicle, but what if you could increase the chances of having the right vehicle every time? Today, with certain software programs, you can.

One of the best ways to decrease risk and increase sales is through specially-tailored software programs. By analyzing what sells best in your dealership, including both retail and wholesale, these programs help you stock the right cars, reduce turn and increase both customer satisfaction and gross profit.

Consider this: If we were to look at every car we take in the same way we look at potential credit decisions, we would assign a risk factor to the inventory. Everyone does this when making decisions about cars, but as you build inventory, the likelihood of having to add vehicles that are higher risk increases. Therefore, the used vehicle manager at your store has a daunting task– one that is often difficult because there is so much information to process, including market and consumer trends and most importantly, your dealership’s sales history.

Let’s look at risk and its impact upon the average dealer. The first thing many dealers think of regarding risk is a water report. They seek to identify vehicles that raise their financial position higher than the wholesale market’s position. These dealers are defending themselves against wholesale loss, but after the fact. I believe we create our wholesale loss at the time of acquisition. When you acquire a vehicle, you should consider its likelihood to sell retail and be aware of vehicles that have a history of long turn times or low gross profit. This information helps you make informed decisions when determining the rates at which to purchase vehicles–rates that help relieve wholesale loss when the values of the assets are undetermined.

Also, remember that if you have vehicles that turn slower or make less profit, you can advertise them in the marketplace at a lower price to bring in more customers. This is not just about lowering cost position. If you consider all data at the time of acquisition, you can increase your position on vehicles that sell well on your lot, thus increasing the possibility of having better cars than the competition. This enables you to turn vehicles faster, increase your average sales price over time and avoid hasty decisions due to a hectic work schedule.

By quickly analyzing key factors, contemporary software provides a score on each vehicle, helping you make the best “buy or sell” decision. It also helps you identify risk, thus enhancing sales opportunities. Overall, the lesson is you don’t have to build a bigger dealership to be successful; you just have to build a better inventory, one vehicle at a time.

Vol 2, Issue 12

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