Used-vehicle sales were once looked at as the step child to the new-vehicle department. How times change. What was once considered additional or “extra” gross profit is now, for many dealers, the life jacket for the overall profitability of a store.

Without it, some dealers would be in serious trouble.

Competition in this area has increased dramatically. Managing the inventory and overall gross profits on used-vehicle sales has become more of a science with improvements in technology and the availability of meaningful inventory software.

So if the used-vehicle sales gross profit picture is so critical to the livelihood of the dealership's success, why leave the management of that inventory to chance? Why do we rely on a back-pocket style of determining what numbers to put on trade-in vehicles and what our ideal inventory mix should be?

The trick to reaping higher grosses lies in handling some of the fundamentals in an efficient, timely and consistent manner. The key word here is consistent.

We employ a process and marry it to technology. Take an average hard-working employee, and when you tie them to good processes with the right technology, good things happen. Let's look at some basic fundamentals you should adhere to:

  • Adopt a days-in-stock or turn policy and stick to it. I commonly hear industry specialists suggest 60 days as a good starting point. That means by 60 days, the vehicle is gone.
  • Adopt a days' supply stocking level. Let's start with 45 days.
  • Measure the performance and gross profits of your vehicle sales by source. Where did the vehicle come from? Trade ins, auction purchases, etc.?
  • Identify which vehicles move the quickest, for the most gross potential and at what price points. It can vary. For example, you may find that units that sell the quickest and for the most money are your higher mileage and lower-priced units.

These are good starting points. Not managing your inventory to standards such as these will ultimately cost you.

Why did we choose a 60-day turn policy? For one, statistics show that vehicles remaining in inventory for more than 60 days rapidly decline in gross profit.

Not managing your inventory well, on a consistent basis will generally cause you to pay more in floor-plan interest costs, advertising (you will have to advertise more to sell your way out of your under-performing inventory), higher commissions (spiffs to the sales personnel) and, oh yes, lower gross profit.

While we may not be able to predict the future on what vehicles will sell the best, we can look at what our best performing vehicles have been in the past. The trick is to maximize our profits on the chances (vehicles) we choose to stock and cut down our involvement in the number of low gross-transactions (wholesales).

Welcome to the used-vehicle inventory software age. There are several choices out there and I will cite some that seem to have positive results with dealers.

vAuto

  • With the vAuto solution, dealers can make stocking, pricing and appraising decisions with an eye on their retail-market competition. The result is that dealers can now stock the hottest vehicles in their market and price them so as to appear at the top of every Internet search.
  • Live Market View shows every vehicle, every where every second.
  • AutoMatch technology allows dealers to analyze vehicles at a year, make, model, trim, color and specific equipment configurations, both original and aftermarket.
  • Delivers the industry's only days supply of each vehicle in every market.
  • rBook: vAuto's exclusive retail pricing guide.
  • Integrated real time with MMR, Kelly Blue Book, kbb.com, NADA, Black Book, Galves, Carfax and AutoCheck industry guides.
  • Five out of the six leading volume dealers of their respective brands use the vAuto system.
  • No contract.
  • Price is $495 to $2,285.

DealerTrack's Inventory Pro

  • Software for new and used inventory.
  • Helps manage/identify optimal inventory mix including make, model, colors, options and price points.
  • Identifies what inventory is needed.
  • Identifies what units should be sold/moved off the lot.
  • Assists with appraisal and book out process.
  • Integrated real-time with Manheim Market Report (Auction pricing).
  • Integrated with Kelly Blue Book, NADA, and Black Book.
  • Pricing: $339-$600 per month for new or used software, $700 per month for both new and used software applications.

ADP's Pre-Owned Vehicle Analyzer

  • Identifies what makes, models and price ranges produce the best gross and return on investment.
  • Identifies what inventory is needed (buy list based on 45 days' supply).
  • Identifies what inventory should be sold/moved off the lot (sell list based on 45-days' supply).
  • Identifies the gross profit and ROI success of your certified used-car program.
  • Measures the performance and gross profits of your vehicle sales by source (trade-ins, auction purchases, etc.).
  • Extracts in-stock and sold used-vehicle data from the dealer management system with no data entry.
  • Produces in-depth inventory and sales analysis reports.
  • Pricing: monthly fee of $215 with no up front costs/fees.
  • Free 90-day trial period.
  • Contract terms can be made co terminus with your existing ADP contract or over a 60-month term.

First Look

  • Appraisal Tool to put the right number on the car, every time, all in one place.
  • Helps manage/identify optimal inventory mix including make, model, colors, options and price points. Will quickly identify and help you act on aging and historically weak inventory.
  • Identifies what inventory is needed.
  • Internet Pricing Analyzer automatically provides the dealership with vehicles that are potentially overpriced or units with a pricing risk. It provides the vehicle's rank and position in your custom market. This tool displays real-time information for every car on your lot.
  • Assists with appraisal and book out process.
  • Integrated real-time with Manheim Market Report (Auction pricing), Adessa, and Auto Trader (inventory search capabilities on line).
  • Integrated with Kelly Blue Book, NADA, and Black Book.
  • Pricing: $199-$1,399 per month (dependent on features selected).
  • Software installed in over 1200 franchised dealerships in 46 states.

Jmsolutions' AAX Inventory Management Solutions

  • Run List Product:

    • Identifies ideal inventory mix including year, make, model, and color.
    • Matches what is available at the auction in your geographic area vs. what you need.
    • Assists with Appraisals and getting the right number on the vehicle.
  • Disposition model features include canvassing Internet sites automatically which returns Internet pricing.

  • Competitive advantage: about 35 field managers across the U.S. assist with hands-on implementation of the software. Assistance includes training dealership personnel with the effective use of the software so they can get the most out of the system, lift overall performance and ROI.

  • Integrated real time with MMR, Kelly Blue Book, NADA, Black Book, Galves, Carfax and AutoCheck industry.

  • Guides.

  • Price points: about $500- $2,000 per month depending upon features.

  • Installation time is two to four weeks.

  • Product is installed in some of the largest public and private dealer organizations in the country.

These are just a few inventory-management offerings available to you. I may have missed some of their features and benefits, but this gives you a start.

It is worth your time and effort to explore solution providers and make comparisons. The used-vehicle inventory model is an important segment to the overall success and profitability of the dealership.

We can no longer afford to “wing it.” We need to be armed with up to date information so we can perform efficiently, and maximize our profit potential with the opportunities that we have.

Consultant Wayne Fortier has spent many years working as a CPA and a CFO at an auto dealership group. He is at wfortier@dixon-hughes.com and 877-357-2727.

New System Is Right Out of ‘Text’ Book

OneCommand introduces an interactive mobile marketing system for auto dealers, allowing customers to receive and respond to mobile messaging and have the system automatically return in kind.

“There are more active mobile phones in North America than there are people,” says company CEO Al Babbington.

He cites OneCommand applications:

  • Service Reminders: a dealership can automatically send text messages to their customers to remind them of their upcoming service appointment. If the time is no longer convenient, the customer can request via a simple text message to reschedule,
  • On-the-Lot Marketing: Customers visiting a dealer's lot after hours can text for more information regarding a vehicle or the dealership itself and have the system automatically respond with a text description, color “brochure” of the vehicle and even video.
  • Customer Satisfaction Surveys: After vehicle purchase or service, a text message asks if customers are satisfied and to please text “yes” or “no.” If the customers respond “no,” the system responds and asks them if they would like to speak to a manager. If they do, the system automatically calls the dealership.