A conversation came up recently about the validity of keeping cars longer because either the dealership is very small and/or can’t find replacement vehicles. 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 that 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 that 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 that in order to hit the sweet spot you would need to make $4300 gross. Can you really do that after 90 days?
I do understand the challenges of being a smaller dealer, smaller inventory…I’m also convinced that if you sell cars sooner/faster that you will figure a way to replenish your inventory.
Holding cars based on the theory that you can’t replace them is what I call “false justification.” I once had a dealer friend who used to say “you can justify anything you want to justify.”
Sometimes when we justify things in our own mind, we are simply lying to ourselves and those around us. That’s all I’m gonna say, Tommy Gibbs