Article

Improving Used Vehicle Management

August 2009, Auto Dealer Today - WebXclusive

by Harlene Doane - Also by this author


Technology is giving today’s buyer the same information dealers have, creating what some people say is an efficient market. This efficient market is causing dealers to change the way they inventory and market their used vehicles. For years, dealers have been working towards a 60-day turn policy, some even had a 30-day policy for used vehicles, but in today’s inventory market, those policies might be outdated. The best inventory managers are taking daily stock walks (a walk of every vehicle in inventory) and based on the vehicle activity making decisions that need to be made. No longer are better dealers waiting for 45 or 60 days to decide it is time replace a vehicle. If a vehicle has been in stock for as little as two weeks and on the lot for 10 days without a single demo, is it the right vehicle for your lot? If it is the right vehicle, is it priced to sell?

Many dealers have implemented a strategic aging policy to help determine whether it is the right vehicle or not. Some dealers have firm policies on aging alone, while others review a vehicle based on how easy it is to replace. For example, a dealer might opt to hold a 2004, 30,000-mile car longer than a 2006, 50,000-mile SUV because of the differences in the ability to find another like vehicle.

Another trend is retail dealers are holding on to older, higher mileage vehicles for retail, whereas in the past, many would have automatically shipped a trade-in off to auction. Smart inventory managers are checking their market, including using market analysis tools, to determine if a vehicle would indeed be a fit for their dealership before deciding to wholesale or retail.

The percent of vehicles wholesaled as a percent of total used vehicle sales is dropping, with domestics having the lowest percent wholesaled.
All Dealer 31.5
Highline 31.8
Domestic  30.5
Import  34.1

Dealers are more concerned than ever about cash and turn. If you are managing inventory on a daily basis and making decisions to keep or sell as quickly as every 15 days, no one wants a vehicle losing five days (one-third of its potential selling days) in the recon process. Because of this, dealers, inventory managers and service personnel are focusing heavily on improving the recon process so that vehicles can be front-line-and upload-ready as quickly as possible.

If a vehicle is not moving as quickly as you would like, start with checking your price and the prices of your competitors. A vehicle that is priced too high in the market will sit for an extended timeframe just like an overpriced home will. Have a system in place that ensures your vehicles are priced based on market (not purchase) price, and evaluate your inventory management techniques often. The faster your inventory turns the more profit that will ultimately make it to the bottom line.

Vol. 6 Issue 7

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