Those hard-to-sell vehicles in your used car inventory aren’t just taking up space—they’re cutting into your profits
It’s a beautiful morning as you open your auto dealership for the day. You look across the lot, and the sun is shining down on your immaculate used car inventory. You love each and every vehicle, but don’t spend time getting attached because you know they’ll sell within 30 days, and hopefully even before that. You’re proud of your reputation for keeping a fresh inventory of in-demand vehicles.
If the above scenario seems ideal, but it feels like nothing more than a pipe dream in your current situation, don’t worry—it’s within your reach.
Keeping your used car inventory moving is essential to running a profitable dealership. You’re not just selling a car to make money; you’re selling it to avoid losing money as well. According to the National Automobile Dealers Association (NADA), you lose $28 every day that a used car sits on your lot. That means every time a new car hits your lot, the clock starts ticking.
Some less obvious benefits of selling your inventory? You’re likely to enjoy improved employee morale, as they feel a greater sense of urgency and purpose in selling—and reap the monetary benefits when the commission comes in. It can also improve your reputation within the community because of your fresh inventory and popular vehicles.
4 Tips for making a profit on your used car inventory
When it comes to selling your used car inventory, time is of the essence. If you’re not getting a car off your lot within 60 days — which should be the absolute maximum amount of time it sits there — you’re doing something wrong. Try these methods for improving turnaround time:
1. Streamline the reconditioning process.
Once you’ve acquired a new vehicle, how long does it take to get it reconditioned and out on the lot? Five days? A week? That’s too long. Remember, you’re losing about $28 a day while your dealership works on that car, so aim to get it ready for retail in 48 hours or less.
Take professional, flattering pictures and have them up on the website within 72 hours, max. Post them on social media to take advantage of the sharing power. Have a dedicated reconditioning team on staff rather than feeding the new vehicles through the service department’s regular schedule of paying customers, and train that team to work efficiently within the time constraints.
2. Perfect each vehicle before it goes on the lot.
Even as you work hard to get vehicles reconditioned faster, don’t put anything up for sale that isn’t ready. Take care of every single detail before any customer takes a test drive, because one mistake could cost you a sale. Get rid of any weird odors, take care of cosmetic issues and scratches, make sure the interior is spotless, and that the vehicle drives well.
Certain cars may be less desirable than others, but with a little makeup on, any car can sell. Every salesperson should drive about 10 miles in the vehicle to get a feel for how it handles so they can speak with authority during the sales process and feel confident the car is ready to go up for sale.
3. Keep a top ten list.
Create a regularly updated list of the top ten oldest cars in your used car inventory. Post it in the break room, and e-mail it to your salespeople every week. Establish an ongoing incentive connected to these top ten (it’ll be different from your usual spiff program since spiffs aren’t supposed to be long term). For example, selling the three oldest vehicles will result in a 50% commission. This prevents your oldest inventory from disappearing into the background and failing to remain top-of-mind for your sales team.
4. Get your entire team on board.
It’s easy to shout “Sell! Sell! Sell!” at your team during sales meetings. After all, they’re getting paid on commission—isn’t that enough to push them? Unfortunately, no. You need to explain to them why it’s so important to sell as quickly as possible, how it negatively affects the business when they don’t, and how it positively affects the business when they do. When everyone is on the same page, you can’t go wrong.
What to do once you see a turnaround begin with your used car inventory
Let’s say you follow the advice above and you see great results, but now you don’t know how to keep up with demand, and your lot is looking a little sparse before you go to the next auction. It’s time to get organized and set strict aging guidelines for your managers. They should aim to follow this general industry guidance for inventory age distribution:
- Zero to 15 days: 50% of inventory
- 16 to 30 days: 25% of inventory
- 31 to 45 days: 15% of inventory
- 46 to 60 days: 10% of inventory
Once a car hits 60 days on the lot, it’s time for it to go—and be firm about this rule. This ensures you keep things moving and you never run out of desirable vehicles to sell.