Once in a while I run into dealers and managers that struggle with how long they should keep units. It can create conflict so severe that someone (the manager) ends up losing their job.
Over the years I’ve run into a few people that are adamant that it’s ok to keep units past 60 days. I’m ok with someone having a different business model that really works. But, I question if it’s really working when you do the math.
Take a look at the chart and the bullet points below:
1. The first one is a car that you make $1200 on, hold 25 days and end up in the sweet spot of 117% (Sweet spot 110 to 120%)
2. The second one shows that if you keep that same car for 60 days, in order to achieve the same ROI you would need to make $2900 in order to get to the 118%. Is that doable?
3. The 3rd example shows that if you hold that same car 60 days, make $1200 on it, you end up with an ROI of 49%…not good, but if you held it 60 days you are probably happy to make the $1200.
4. The 4th example shows that if you make a $1200 gross on a car that you hold for 90 days you end up with a horrible 32% ROI…is that a good use of your money?
5. The last example shows that if you hold that same car for 90 days, in order to hit the sweet spot you would need to make $4300 gross. Can you really do that after 90 days?
Holding cars based on the theory that you can’t replace them is “false justification.”
You might be a rock star, but unless you do the math you might be living under a rock. That’s all I’m gonna say, Tommy Gibbs