Four Ways Car Dealers Can Boost Inventory Profits

New-car dealers do trade-ins daily, but it’s an imperfect art.

The trade-in process can leave customers sore, usually over differences in what they and the dealer think a trade-in is worth. In a survey, 21% of car buyers cited negotiating a trade as frustrating.

But dealers can suffer trade-in remorse too, especially if they are stuck with a loser cruiser that ends up lingering on the used-car lot.

“Dealers are not spending enough time using trade-ins to enhance their inventory,” says Brian Tinkelmeyer, director-business development for vAuto, a provider of inventory-management software.

“One dealer told me his porter executes many trades,” Tinkelmeyer says at a recent DrivingSales Presidents Club conference. He cites a study in which trade-ins accounted for 20% of aging lot vehicles that wear out their welcome.

Dealers can have a business reason for agreeing to undesirable trades. “Sometimes, dealers take a trade-in to make a new-car sale, and get stuck with a car they don’t really want,” says Andrew DiFio, dealer principal at Hyundai of St. Augustine in Florida.

Trade-in vehicles can make up 40% of a dealer’s used-car stock, so it’s vital to “make strategic trades to get the right inventory mix,” Tinkelmeyer says in offering four profitable inventory tips. The other three are:

Vehicle inventory management is important because so much money is involved, he adds. “On average in the U.S., 3.8 million vehicles representing $1 trillion are on dealer lots. I don’t know of any other industry that has so much money tied up in inventory.”

Yet, “70% of surveyed dealers say they are not entirely happy with their inventory mix.”

[email protected]