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Improving Used Vehicle Performance

Best practices For Building A Winning Inventory


Decent used vehicles are hard to come by.


Bearing that in mind, what are some things you could do to improve used vehicle sales at your dealership?

Improving Used Vehicle Performance

Reduce aged inventory

By the time vehicles hit the 30-day mark in inventory, they often “run out of retail juice.”


You can check this at your own dealership: conduct a two-pronged test of the past three months of used vehicle sales.


Assess your front-end gross profits and the return on investment per sale, segmenting sales by days in inventory. Based on the trend, you may find that most of your units retailed after 30 days did worse than units sold before the 30-day mark.


If so, it might be time to move your “goalposts”: aim for 45 days as your viable retail window (or 30 days if you’re feeling particularly ambitious). Cutting down the window can mean tuning your dealership merchandising and pricing strategies to encourage a faster pace of retail sales.


It’s also advisable to try to keep at least half of your used vehicle inventory under 30 days at all times. Anything less and you’re likely under-cutting your department’s net profit potential.

Acquisition

The first and rather obvious goal is to stock the right cars. Don’t just buy vehicles to replace the last month’s stock; put some more thought into it. If you can identify and acquire new used vehicles based on model, trim level, color, option packages, and other features that customers want, you’re more likely to improve ROI and boost profit margins.


Another piece of advice from Paul Lynch, the general sales manager at DePaula Chevrolet, Albany, N.Y., is to not “buy or sell cars with bad CARFAX reports.” It makes a lot of sense: customers in the market for a used vehicle want something affordable and reliable, and a bad CARFAX report could easily turn a customer away.


Vehicles with a low market days supply often sell fast, so it’s worth focusing on acquiring those as well.

Reduce acquisition costs

So you’ve improved your dealership’s acquisition. Now what?


To reduce acquisition costs, increase efficiency. We live in an era of new, advanced technology; use it to your advantage! Instead of going through physical sales, turn your attention to online auctions to get the wholesale inventory you need. You’ll want to look for ways to increase both cost and time efficiency. For example, find ways to get inventory that require your managers and buyers to travel across the country less frequently.

Pricing

Pricing is important: you need to balance profitability with attracting buyers.


It’s important enough that your dealership should be reviewing vehicle prices often. Lynch’s managers review the price of each used vehicle once a week in a nearly four-hour group meeting. They focus on the outliers (a.k.a. “units that fall short of a 2 percent SRP/VDP conversion minimum on classified sites and those above 4 percent”), and also check VDP conversions daily, adjusting prices when needed.


“We’ve got multiple sets of eyes on our pricing,” said Lynch in a vAuto article. “Some dealers may think we’re wasting our time on pricing. I think it’s the reason we’re not like everyone else. There’s a sweet spot for every single car and we’re always looking to be right there.”

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