Data: The Secret to Acquiring Profitable Inventory for Your Dealership
- Learn best practices for acquiring the right inventory.
- "This decision should be based on facts - not feelings."
In 2013, used vehicle sales averaged almost 32%* of a dealership’s total sales dollars. That means maximizing the Used Vehicle Department’s operations can have a major impact on your dealership’s bottom line.
From the work I’ve done in dealerships throughout the country, I’ve found several best practices to help you run an effective and profitable pre-owned operation.
There are three main areas to focus on: acquiring the right inventory, properly appraising trade-ins, and dealing with aged inventory. In this article, I’m going to talk about acquiring the right inventory.
What inventory is the right inventory?
Before you can search for the right inventory, you have to know what you’re searching for. This decision should be based on facts – not feelings.
Take into consideration the number of previous sales for that particular vehicle, as well as past vehicle turn rates, market information, and profit margins from similar vehicles.
Done manually, this can be a labor intensive task. However, a Dealership Management System combined with a used vehicle management solution has the ability to sort through this data and provide a list of desired vehicles specific to your dealership, sometimes known as a “buy list”.
Now you know what you need, but where do you find it?
The right inventory mix can be acquired from several sources, the two most common are wholesale auctions and customer trade-ins. You can also use your existing customer base to find vehicles on your “buy list.”
With the right tools, you can view auction run lists right from your computer to determine what vehicles are selling and where. You can also search through your customer base to find individuals who have a vehicle on your “buy list” and may be in a good position to trade-up.
A profitable used vehicle department starts with stocking the right mix of inventory for your dealership and your market. You need to know what inventory is the right inventory and where to find it.
You can manually piece together various bits of information to get this optimal list of vehicles but it would take a lot of working hours and a lot of workers. With tools like Used Vehicle Management, these tasks are easier, which makes maximizing your profits easier too!
Next time, we’ll look at the second area of focus when it comes to maximizing your profits: properly appraising trade-ins.
For more on how to use data to drive profit in your dealership, see our whitepaper: What’s the Big Deal About Big Data? Increased Profit-per-Customer.
*NADA Data, 2014