Auto Dealers Moving Forward: How to Manage Used Inventory

Used Cars

By the Experts at AutoTrader.com

Clean­ing up aged inven­tory can be a painful les­son, so it’s impor­tant to learn from your expe­ri­ence. Here are some tips to assist auto deal­ers in build­ing a process for man­ag­ing used inven­tory in the future.

• Per­form a whole-lot inven­tory analy­sis. Assess the value of every vehi­cle on your lot so you can deter­mine the right mix of core and non-core inven­tory. Use this infor­ma­tion to deter­mine opti­mal turn cycles as well as the right time to buy and sell inven­tory. It can also help you price com­pet­i­tively for your market.

• Have an exit strat­egy for every car that you acquire. Source vehi­cles so you can retail them; don’t let their whole­sale price deter­mine your pric­ing strat­egy. Instead, take into con­sid­er­a­tion whether that vehi­cle is appro­pri­ate for your mar­ket — does it have the right equip­ment, fea­tures and options? If you live in the moun­tains and you’re look­ing at a con­vert­ible, can you really turn it in 60 days or less?

• Reset the way you look at used cars. Unlike good wine, used cars on your lot don’t get any bet­ter with age. Approach every used car acqui­si­tion with an eye to move it quickly.

• Develop a proac­tive strat­egy for man­ag­ing, mar­ket­ing, buy­ing and sell­ing your vehi­cles. The strat­e­gyshould take into account gross profit, return on invest­ment (ROI), days to turn, aver­age cost of sale, sea­son­al­ity, real­is­tic guide­lines for eval­u­at­ing and apprais­ing trades, and an explicit aging plan.

• Get a state-of-the-art pric­ing tool — and use it. Pric­ing tools can be all show and no go. Get the best you can pos­si­bly afford; the invest­ment will pay off because you’ll use the tool to price your vehi­cles to sell at a profit in the short­est amount of time.

• Rede­fine your sourc­ing strat­egy. Instead of look­ing at the vehicle’s con­di­tion, use fac­tors like a model’s past per­for­mance and aging his­tory, cur­rent mar­ket demand and resid­ual value.

• Invest in an inven­tory man­age­ment sys­tem. Soft­ware pack­ages like vAuto can help you do the mon­i­tor­ing. They can be set up to scan the mar­ket in var­i­ous assigned radiuses for sim­i­lar vehi­cles and their price dif­fer­en­tial to your vehi­cles. These tools will also help you com­pet­i­tively price your vehi­cles so they’re more likely to sell.

• Retrain your sales per­son­nel. You can safely assume that every per­son who walks into your deal­er­ship has done some research online. It’s impor­tant that your sales­peo­ple under­stand this new shop­ping behav­ior and are pre­pared to work with con­sumers that are armed with com­pet­i­tive pric­ing. Your per­son­nel should know how a car’s pric­ing is derived and be able to explain it in a trans­par­ent man­ner to a shopper.

Con­tact the experts at AutoTrader.com and vAuto for more information.

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