By Tommy Gibbs
If you’ve ever attended one of my workshops, you know how much I focus on driving your average cost per unit in stock down. As a quick review, it’s imperative that we not be in the “NEWSCAR” business. That’s when your average price per unit in stock continues to creep up to a point where you are too close in average cost per unit in stock to your new vehicles. It’s an easy trap to fall into. The bottom line is the more your average cost moves up the more your ROI continues to go down. There are fewer butts that can fit in these more expensive cars and thus they are going to turn a lot slower. Even if you end up making a decent gross, the ROI is not very good because it sat on your lot so long. We are better off turning three $10,000 cars multiple times than one $30,000 not so very often. So, the questions always comes up, where do I find cheaper cars? We would all agree that those are the same cars everyone else is trying to buy at the auction. It’s really not so much about going out and buying cheaper cars, but stepping up on the right cars at the door, and turning the more expensive cars we trade in at a faster turn rate. With the right software, you should be able to run a report each day listing the 10 most expensive cars in stock. There should be a daily focus on these 10 cars. They should be priced right. When I say price right, I mean throw your normal pricing scheme out the window on these units. They must be price at a price point that makes them go away in a hurry. Furthermore, consideration should be given to putting bonus money on them sooner rather than later. Every manager in the dealership needs to be aware of these units and where they physically are located. In additional to looking at the top ten most expensive units each day, we have found great success holding a C.A.R. meeting each Monday. C.A.R. stands for Cars at Risk. We use a form to track these units and objectives that forces us to develop a plan of action. In essence we go over each unit and ask the Used Car Manager the following question: Do you agree that this unit is at risk? If the answer is yes, then the following questions need to be address and reviewed the following Monday to see if we are lying to ourselves.
If it’s determined it should be wholesaled, answer the following:
How much loss are we looking at and willing to go?
- When will we get it done?
- How and where will we get rid of the unit? (shop to other new car dealers, which auctions, etc.)
- Is the unit ready to go to the market?
If it’s determined it should be Retailed, answer the following:
What’s our plan of action to do so?
- Is it ready to go?
- Is it price right? (Regardless of profit or loss)
- Where and how will we advertise it? (Don’t’ forget to change the price on your website)
- Where are they parked? (Everyone needs to know about these units and where they are)
- Spiffs for Sales People? Spiffs for Managers? (Make them big enough to get someone’s attention)
Remember even thought you might over pay to move this unit and make little or no gross, the bottom line is this is a CAR AT RISK and is only going to get worse. These are the very units that will have a tendency to eventually age on you if they have not already done so. All the things we have discussed in this article are simple to implement, and will pay huge dividends if you have the discipline to do them each and every day and each and every week. In the end your life will be a lot less stressful and your bottom line a lot more plentiful.
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