Car Dealership Inventory: Asset or Liability?

In a time of shrinking margins, better-educated consumers and increased demand for transparency, dealerships need to maximize all their assets to survive and thrive.

One of the dealership’s most visible assets – and often the biggest source of wasted budget and opportunity – is vehicle inventory. Choices made here can quickly make or break profitability.

Holding on to Heartache?

The holding cost of each vehicle is calculated by taking a dealership’s overhead expenses and dividing it by the number of vehicles in inventory. These holding costs start to accumulate the moment a dealership acquires a vehicle. An NCM Associates study says the average holding cost for a vehicle is $37 per car per day. It doesn’t take long for a vehicle’s profit potential to erode to nothing.

Successful dealerships never lose focus on this potential liability. For the top dealer groups, only 10% of inventory is older than 60 days. Selling a vehicle in 30 days or less is a proven way to maintain profitability. They do this by presenting their customer base with the vehicles they desire to own.

The good news is that finding the perfect shopper for a specific vehicle has never been easier. Technology is available that intelligently matches customers to cars, allowing dealers to make sure they have the correct inventory for their marketplace.

Here are tips to keep the process (and vehicles) moving:

Get Inventory Online Immediately

The faster you can get inventory in front of customers, the less a dealership will have to absorb in holding costs. The clock starts the moment you acquire a vehicle, so make sure there aren’t any bottlenecks in the process of getting the vehicle ready for sale and on the lot.

Finding ways to streamline reconditioning, photography and all the other steps along the way will maximize the gross on each unit. The customer can’t buy a car that’s not available for sale.

Move Old Inventory

It’s estimated a dealer pays between $150 and $300 per month for insurance on each vehicle sitting unsold. When a vehicle stays on the lot for 60 days – or often a lot longer – this asset becomes a liability. Dealers can now use intelligent marketing platforms that identify these vehicles and search for individuals who would most be interested in them.

Instead of hoping that a shopper comes in searching for that vehicle, the dealership can proactively present the customer with the option.

Keep Track of Daily Flow

Valerie Vallancourt_Outsell_0

Monitoring the behavior of consumers, keeping track of in-demand inventory and all the other things that go into finding the right customer for the right vehicle needs to be done consistently and continuously. A marketing platform can do this critical work for you, keeping both you and your customers updated with recommendations. (Wards Industry Voices contributor Valerie Vallancourt, left)

Studies indicate dealers can sell three times as many vehicles by using smarter marketing tools in the critical 30-day window of a vehicle’s availability.

Valerie Vallancourt is vice president-marketing for Outsell, a marketing company.