Turn Rate: Is Your Inventory Invisible?

Few would argue that incoming inventory is just as important as outgoing inventory. Yes, sales are what it’s all about but, the next generation of vehicles in a dealer’s inventory is just as important.

 

Those incoming auction and trade-in vehicles represent the immediate future for the sales department. However, they frequently go unseen. These vehicles can get lost in managers’ minds and sometimes are never even seen by potential car buyers. It can be four days, a week, or even more before they are displayed on the lot and every day lost is money out the window and less profit for the dealership.

 

On average each vehicle sitting on the lot costs the dealership $40 per day. If that incoming vehicle is pushed through recon in four days, rather than a week or eight days, that is a positive gain of around $160 per vehicle. While a longer turn around doesn’t necessarily mean the sale is lost, if the vehicle is made available faster, the dealership could gain another $160 in gross.

 

Car buyers shop at all hours of the day and night, online, with every website they can find, as well as on your lot. Used vehicles represent the bulk of profit for dealerships, compared to new vehicle front-end-gross. So, it is in the dealership’s best interest to get those incoming vehicles visible to buyers online and on the lot as soon as possible.

 

In most cases, dealerships won’t merchandise a newly acquired vehicle until it has first been through service and detail. Only then are pictures and videos captured and syndicated to third-party listing sites and the vehicle parked on the front line awaiting the perfect customer.

 

That can easily take anywhere from 4 days to 2+ weeks, depending upon the dealership’s processes. And that can mean lost customers. If someone is searching for a vehicle online, and you have it in inventory, but haven’t merchandised it, that potential car buyer won’t even know it exists.

 

Have you ever had a vehicle sitting in your backlot waiting to be reconditioned or put through detail, which you were unaware of -- then a customer came in but left as they failed to find the vehicle they wanted, and you discovered, after the fact, that the vehicle they wanted was sitting there on your back lot -- but., as it is not listed on your inventory sheet, your salesperson was unaware of it? My guess is you have.

 

The moment of truth and path of least resistance to profit is found by merchandising your newly acquired vehicles as soon as you get them. By making your vehicles available as soon as possible they show up faster in search listings for your website and third-party sites. Customers are quickly aware that the vehicle exists for sale at your dealership. They certainly can’t buy something if they don’t know it exists, right?

 

According to NADA, dealers lose $52 per day in depreciation. As it stands, a dealer that sells 180 cars per month with an average 45-day turn time will lose $3 million dollars per year in profit. But, by improving those elements of the inventory turn process you can control, such as reconditioning times, you can reclaim a good bit of that lost profit. And that’s what we’re in business for, right?

 

In my next blog, I’ll provide some tips on how to sell your vehicles faster, improve merchandising and increase sales volume while retaining gross.

 

Strategy matters. Unless, of course, you want your vehicles to be invisible.

 

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