Used Car Inventory
Greetings,
I am interested in opinions or pros and cons on having a strict 60 day turn on used inventory.
Replies to This Discussion
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Permalink Reply by David Lu on
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Many dealerships will say they have a strict turn policy. Few really do. Sixty days may be too many. Studies done on used sales for most dealers probably will show that higher grosses are achieved before the vehicle is 30 days old and that at 60 gross usually declines. At 60 days inventory is turning 6 times a year. 9-12 is the benchmark. You may wish to keep records of your gross turns per vehicle. Properly done you'd get a good idea of what to keep and what to wholesale.
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Permalink Reply by Fran Taylor on
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I agree with Mr Lu. I recently started a 20 month training course with a dealer who is having some major problems in sales. The used cars are on a 60 day turn about half of the time. The dealer told me with a smile that the average RO is about $1500 per car. I told him that isn't all profit. Take out for labor and parts and your profit is a lot lower.
Add the $1000 pack on the car to start and you are up to $2500 above ACV. When it comes time to wholesale the car that is 60 days old you loose tons.So are you really making that money on a $1500 repair bill?
The other problem is when they do sell a car they usually have to cut the deal because the banks won't buy the amount financed because they are way off on the loan amount or they loose the deal all together.
I think is is a must to keep the cars priced reasonable to other dealers and the attitude and profits will come. The 60 day turn is ok but 30 is even better. Good post Mr. Jenkins.
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Permalink Reply by Jeff Sullivan on
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I do understand the "desire" to turn inventory in 30 days, but at the same time Managers need to be realistic. In the current preowned market the ability to replace the sold unit with fresh inventory is challenged by the high cost of the replacement unit. Also the ratio of "rental" units compare to off lease or traded in units is very high. Rental units have a stygma that follows them, making them a bit harder to sell.
We have to really see and study what is going on today and not base our today actions off our historical actions.
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If the replacement cost of a sold unit is challenged by the high replacement cost of another unit, then why not cash out at the auction and buy a fresh unit that might move faster? Rental cars are hard to move? Simple - dont buy rental units at the auction.
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Permalink Reply by Vinnie Torrente on
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Dave,
It depends on your demographics and market: A huge market with competitors force the quicker turn.
My rules:
45-60 day max on Domestics
60-75 days Benz,bmw lexus etc.....
You should be turning your inventory 40-45 days depending on the size of your dealer. Books change every week in so cal we use bucket jumps every two weeks..
Thank you
Vinnie
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Permalink Reply by NANCY SIMMONS on
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How many dealers share their inventory with a networking group...local dealers who act as trade partners on pre-owned and sell from each other's inventory?... This is a great alternative to towing them off to the auction in 60 days with buyers fees, sellers fees, transportation charges, only for the dealer 20 miles away to buy it!
We sell from each other's inventories when it comes to new units, it is even more important to build those relationship and build a networking group for pre-owned!
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Permalink Reply by Michael Collinson on
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One word of caution regarding strict turn policies on used inventory. You really need to pay attention to where your manager is getting his cars. It could be that you might be just recycling the aging on your pieces. Make sure your manager is spreading out his buy/sell wholesalers.
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As it pertains to "rentals" which I tend to avoid unless I am targeting sub prime buyers, I do avoid them, maybe I did not make the point clear enough. The ratio of rental units to off lease/trade in units is drastically higher. Which in turn drives demand up on the lease end or trade in units even more. Sorry if you could not understand the point I was making.
Too many managers continue to base todays market off 3 year old thinking.....
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Permalink Reply by Dave Jenkins on
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Thanks to all of you. We are on a strict 60 day turn and I am part of a six store group, which most time's we rotate inventory between us, by putting the adjusted number on the unit. and taking the wholesale hit, It's usually alot less costly selling to sister stores vs. Auctions. I guess the bottom line is that you all agree on a short turn,and the benefits of doing so. I appreciate your input. Thanks
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Dave,
I guess we are on the same wave length here.... I agree... It can be a wonderful thing to network with other dealers and pre-owned facilities~
Dave Jenkins said:Thanks to all of you. We are on a strict 60 day turn and I am part of a six store group, which most time's we rotate inventory between us, by putting the adjusted number on the unit. and taking the wholesale hit, It's usually alot less costly selling to sister stores vs. Auctions. I guess the bottom line is that you all agree on a short turn,and the benefits of doing so. I appreciate your input. Thanks
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How many of you adjust your pre-owned inventory value monthly on the financial statement? Very curious to know from a comptroller's stand point.....
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