A Bad Bet

There’s always talk about where the value of used cars is going. Are they going down, stabilizing or going up? Just this past week there were reports in Automotive News that indicated values may be on the upswing.

Let’s say for the moment there are a few models, a few markets, or a few situations where that may be true. You can skin this cat anyway you want to, but trust me on this. If they are going up, it’s temporary and if you decide that your new business model is to hold cars longer because the values see a sudden spike you’re making the worst bet of your life.

There is no sure bet. But there are some really bad bets. A bad bet is to hold on to your inventory because cars are scarce. Really, it’s a bad bet. The whole notion that you need to hold your inventory longer is as flawed as an old pair of jeans with those cool rips and tears in them.

The number one thing you should keep in mind is “buying and selling in today’s market.” You will never go wrong if you follow this discipline. “Today’s market” can be defined as a maximum of 20 to 30 days.

If today you pay too much money (or what you believe to be too much money) because the market is up, as long as you sell it while the market is up, then you will be making a solid bet.

To do anything less is a bet on “the come.” Gamblers bet on the come all the time. And they win once in a while. It’s funny how we want to remember those few wins. They are like a drug we just gotta have more of. Have you ever noticed all those gigantic, gorgeous casinos in Las Vegas? They were built with gamblers betting on the come.

They were not built by people who understand how the game is really played. Whatever the gamblers thought, it was wrong. Holding your inventory will turn out to be wrong.

Dealers who buy into a bad bet of keeping inventory often have poor processes in place, have lazy people who don’t want to scramble to find cars, and don’t understand the concept of “buying and selling into today’s market.”

A better bet than holding your inventory longer is to “shoot the moon” for gross profit for the first 20 days or so. Asking for more when the law of supply and demand is on your side is a very good bet.

As I often say, “Don’t be stupid.” Don’t think for a minute you can hold out for a $4000 gross for 45 days and then lower your price and you will be ok. You won’t.

Here’s another good bet for you. It’s now August, September is right around the corner. The fall will soon be here. Halloween, Thanksgiving and Christmas are on the way. Lower prices will follow. It’s a sure bet. That’s all I’m gonna say, Tommy Gibbs