The experts have been saying it for weeks. Lower your used car inventory now.  AutoRemarketing.com says "Kelley Blue Book calculated that used-vehicle values dropped 2.6 percent overall in October, marking the fifth consecutive month of wholesale declines.

Since peaking in June, KBB discovered used-vehicle values overall have sunk 10 percent with the most pronounced declines coming from fuel-efficient vehicles, falling more than 20 percent."

I am already witnessing this drop in our inventory and watch my Vrank and Price rank drop almost daily.  Lowering the inventory $$$ and units has been a challenge since, fortunately for us, most of our vehicles come from trades. Since new car sales is just starting to slow, the trades continue to flow in.  We haven't purchased a vehicle in almost 6 weeks and have held steady at a 150 used car inventory.  Retail Used slowed from 150 to 130 and now to 102 October MTD. Our machine kept pumping them out, so when we are down 30 sold units in a month - they end up in used inventory. 

The irony is as sales continue at any rate, and we overcome the sales constraints, and the inventory does drop it will have the compound effect of lower $$ investment, increased turn and increased ROI, even with reduced gross profits.

We all know the longer they sit, the less they are worth.  Ever hear "Your first loss is your best loss"?  Roll your used cars.  Don't wait, they are not going to be worth tomorrow or the next day.  Price your cars to sell and move on.  

Some dealers I meet might as well order a truck load of Bronze since they will be Bronzing most of the inventory they will be buried in come model year change.  If you haven't already, take action now.

 

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Comment by Stan Sher on November 18, 2011 at 12:30pm

Excellent information.  You just have to adjust to your market and the times (as you have been doing) and you will continue to be successful.  Keep knocking it out the ballpark.

Comment by Adam Barish on November 14, 2011 at 6:03pm

Kevin make a great point. I know all to well being a Honda Dealer.  We survived and thrived on used through the summer, that is when we sold the 150, 140's...moving customers to Certified Used Hondas.  November and December are our slowest months in NJ so the slowdown now is more palatable than it was over the summer selling season.  My feeling is that while new Hondas may be in shorter supply, I don't think it will impact the used cars enough to make any impact on used values (wholesale or retail).

Comment by Adam Barish on November 14, 2011 at 5:57pm

Jim, you are right on when you say we let our trades dictate our inventory.  It's hard to let "good retail pieces" go when you know you you took it in "right".  Balancing the make/ model/ price/ categories becomes very tricky this time of the year. To John's question: I don't know any under-stocked dealers in my area of Northeast New Jersey.  It certainly is an opportunity for those dealers needing inventory.  Anyone in my condition (which is not terrible, just challenging) should definitely liquidate now.  To keep the inventory and "hope" for increased value going into year end is crazy.  Cars are not investments, contrary to what we tell our customers, they are depreciating assets.  Year end just accelerates the depreciation.  If anyone else has any year end strategies, I'd love to hear them.  I don't know it all, I just enjoy sharing my experience and thoughts with others who want to improve and share.

Comment by Marsh Buice on November 14, 2011 at 5:55pm
Gr8 info Adam, thanx
Comment by Jim Keffer on November 14, 2011 at 5:43pm

We've experienced similar challenges Adam.  My take is that we have to wholesale cars as soon as possible after we trade for them.  If they don't fit the model for maximizing turn and volume they need to go away fast, so we can go buy the right units.  Unfortunately, we let trades that came in dictate our entire used inventory strategy just like you.  While having lot's of trades is a great scenario, it isn't the best generator of the ideal Used Inventory.

There will be great buying opportunities for the remainder of fourth quarter, and we're going to try to take advantage of them, but we have to get off of the inventory we have first and that means lower transaction prices to make less desirable inventory more attractive online.  Live and learn I suppose.  Best of luck to you and your store.

Comment by Brett Corcoran on November 14, 2011 at 5:29pm

Good information, Adam.  Thanks.

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