Auto Dealers Moving Forward: How to Manage Used Inventory

Used Cars

By the Experts at

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 and vAuto for more information.