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Is Wholesale Loss Kicking Your Butt? Learn Tricks to Minimize It

Article Highlights:

  • Quit throwing profit away with these 3 steps for minimizing wholesale loss.
  • "Each day that passes, you see dollars disappearing."

Picture this: You just took a five-year-old vehicle in on trade. You cleaned it out, fixed it up, washed it, and put a price tag on it. Now you market it and wait… and wait… and wait some more.

Each day that passes, you see dollars disappearing. Before you know it, you take it to auction and end up losing money.

This probably wasn’t too hard to picture because most likely it’s happened to you. It might even be happening right now!

There is some risk in taking in trades and deciding to retail them on your lot. By the time you realize a vehicle isn’t going to sell, nine times out of 10, you will lose money on it.

The trick is learning how to minimize wholesale loss, and maybe even turning that loss into a gain. There are three steps to making this happen:

  1. Proper appraising
  2. Proper pricing
  3. Using sister stores

1. Proper Appraising

Your best plan of action is to know up front whether you plan to retail or wholesale the vehicle. This will determine how much you’re willing to offer for it so you don’t invest too much.

This task requires your sales manager or appraiser to do lots of information gathering. They must:

  • Look up book values for both retail and wholesale.
  • Review the market to see how much the vehicle is actually selling for.
  • Review auction data to see how much it’s selling for in the lanes.
  • Review your sales history to see how this particular vehicle performed at your dealership in the past.

This is a bunch of information to gather for a decision that should only take a few minutes. Luckily for appraisers, there is sophisticated technology on the market that can help you speed through each of these tasks quickly and come to a retail or wholesale decision in just a few minutes.

2. Proper Pricing

If you decide to retail the vehicle, the next step is to determine the right price. This can be a major contributor to how fast the vehicle will sell. You want the price to be competitive in the market, but you don’t want to sell yourself short.

In addition to setting the right price initially, you need to have a pricing plan in place ahead of time for how and when you will mark down the vehicle.

Instead of just slashing prices because you’re worried about the vehicle not selling, review what similar vehicles are selling for at auction so you know at what point you’ll lose money. Then set up a discount schedule for each extra day or week it sits on your lot. Once you hit your pre-determined mark, you know it’s time to send it away.

3. Using Sister Stores

This brings me to my final point on minimizing your wholesale loss. Sending away your vehicle because it won’t sell on your lot doesn’t always mean sending it off to auction.

If you are part of a dealer group, your other stores might be in need of the vehicle you are trying to get rid of. Your sister stores should be the ones you look to first when a vehicle isn’t selling on your lot.

Again, this can be a time-consuming task if you don’t have the right tools. However, a proper enterprise solution will be able to tell you exactly which vehicles each and every store in your dealer group has on its “buy list.”

Conclusion

You no longer have to accept a major loss each time you take a vehicle to auction as inevitable. There are ways to minimize wholesale loss and even, on occasion, turn it into a gain.

With the right software and strategies in place, your sales team can ensure every trade accepted for retail is appraised properly, priced competitively, and set up with a discount schedule. And if the vehicle doesn’t move, sending it to a sister store can be a great alternative to the auction.

For more information about a tool that can help you make these changes successfully, visit the Used Vehicle Management page. You can also contact our Consulting Services group at 888.204.6092 for information on how to put the right used vehicle processes in place at your dealership.

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Product Planning Manager, Vehicle Inventory applications

Andrew is Product Planning Manager at Reynolds and Reynolds for Vehicle Inventory based applications. Andrew, a graduate of Northwood University, has been with Reynolds for over 20 years and has held various positions in the Service, Support, Education, and Product Management departments.