Maintaining a balanced new-vehicle inventory in both a strong or weak market is essential to dealer profitability.
The Internet can help with that, especially when auto makers are pushing certain vehicles a dealer might not want, but is reluctant to flatly refuse to accept, says John Hayes, a certified public accountant with the Cleveland, OH, firm of Maloney+Novotny.
He cites a website, idealinventorysolutions.com, currently open only to registereddealers.
It may usher in a new way for dealers to buy and sell vehicles among themselves.
Hayes and fellow members of the AutoCPA Group, an association of dealership CPAs, saw a demonstration of the online tool.
He tells of a situation where it helped dealers balance their inventory needs and stay eligible for auto maker reward programs.
The particular case involved Chevrolet dealers using the system when ordering ’11 Malibu sedans and Silverado pickup trucks.
“Chevy dealers were offered allocations of 10 Malibus and 10 Silverados,” he says. Dealers, who weren’t interested in the one-for-one deal, conditionally agreed to it but ultimately took delivery of only three Silverados and all the Malibus.
To dispose of the unwanted Silverados, they posted them for sale to other dealers on the webite. Dealers interested in the trucks could agree to the asking price.
They could not counter-offer. That gave the seller more control over pricing and avoided low-ball offers, Hayes says.
Buyers and sellers remain anonymous until transactions are completed, he notes. “What’s neat about this scenario is that the dealers weighing this offer could take all 10 Silverados before the consensus period closed and enjoy additional cash flow in the form of holdback money,” Hayes says.
They also could collect manufacturer’s rebates they otherwise would not get if they passed on ordering the trucks, he says.
In the case of prospective buyers refusing to meet asking prices, sellers could leverage holdback money to reduce the prices or ultimately turn down the seven additional Silverados.
Selling and buying dealers are charged $199 commissions for completed sales. In allocation sales made with this system, vehicles are shipped from the factory directly to the dealers who purchased them online.
Shipping charges on the invoices cover this cost, eliminating added transportation fees.
The new system helps fill gaps for cars in short supply, such as Chevy Camaros and Cruzes, Hayes says.
The system also allows for selling vehicles already at dealerships. It does not replace dealer trades, which require shorter lead times, because customers are waiting to take delivery of an ordered car.