A few simple strategies can help your used car dealership slash turn times and increase sales
- The cars you choose matter
- Stale inventory will cost you
- Planning ahead is essential
- Don’t let reconditioning slow down sales
Naturally, the goal of any used car dealership is to sell as many vehicles as possible. The faster you can move a vehicle, the higher your ROI and the sooner you can get another piece of inventory on the lot.
It sounds so easy, but many things can slow down your time-to-sale, including obtaining the vehicle, getting it ready for market, and finding an interested customer.
Are you doing everything you can to streamline this process?
Here are five ideas you can use to improve turn times and boost sales on your used car lot.
1. Avoid problem cars
It’s vital that you do your research before acquiring a vehicle. Of course, this is easier said than done in some cases, especially if you’re accepting trade-ins as part of a sale. However, when buying vehicles at auction or through other channels, practicing acquisition discipline is essential to your bottom line.
Say, for example, you’re lacking inventory and need to get some vehicles on your lot. You might head to an auction to acquire a few cars. In this scenario, it’s easy to ignore or avoid condition reports through CARFAX, AutoCheck, and other services because sales happen fast in these live environments.
You could end up with vehicles requiring a lot of work if you don’t do your research, though, which will cost you in the long run.
Reading a vehicle’s crash history, frame damage reports, and even available service records will help you avoid problem cars that require unprofitable recon investments. You’re sometimes better off walking away empty-handed than having to get someone else’s problem car ready for market.
2. Note your average inventory costs
Expensive cars tend to sit on your lot longer than inexpensive ones. When you have a lot of high-priced inventory, you begin competing with new car dealerships rather than other used lots. This shift makes it harder to move inventory quickly.
Come up with an average inventory cost that works in your market and keep your average prices below that amount at all times. While it’s acceptable to have a few high-priced vehicles on the lot, the majority should be affordable for your typical consumer if you’re looking to turn inventory rapidly.
3. Establish an ideal sales timeline
You likely know that used cars begin losing value soon after you acquire them. The longer a car sits on your lot, the less profit you stand to make when you finally complete a sale.
There are a few reasons for this phenomenon, including interest payments on the purchase, the loss of lot space for other cars, and natural market shifts. The amount an unsold vehicle costs you depends on your local market, but you should plan for about $40 per day.
With these losses in mind, it’s beneficial to develop an ideal timeline by which you want to move each vehicle you acquire. Your policy might state that every car that sits on your lot for a certain number of days must move, no matter what.
Ultimately, management is to fault for any vehicle that doesn’t sell within that timeframe, so you’ll have to make the necessary pricing adjustments to meet your goals.
4. Have an exit strategy
Hand-in-hand with your sales timeline is implementing an exit strategy for vehicles that don’t sell within the allocated period. You can often trace the problem back to the acquisition phase, as you might have paid too much for the car in the first place or selected a vehicle that needed a lot of reconditioning before it could reach your sales lot.
Either way, you must have a plan in place to get the car off your lot, even if that means eating some costs in doing so.
Some dealerships will wholesale stale inventory, effectively moving their problem vehicles to another dealer, albeit at a loss. While this strategy might seem counterproductive, it helps you maintain inventory turns. It also prevents you from putting too much time and money into a car that obviously isn’t worth it for your bottom line.
This strategy takes discipline to make hard decisions in spite of sunk costs, but it’s worth it when looking at the overall picture.
5. Streamline the recon process
Tying most of these strategies together is the reconditioning process. If you can streamline how your recon division operates, your vehicles will be ready for market faster. The result is that your stock will move at an accelerated rate, and you can reduce inventory gaps because there’s less time waiting for cars to be ready.
Communication is vital when streamlining the recon process because each car has different requirements before it’s ready for market. It’s management’s job to keep everyone on the same page by tracking each vehicle and addressing any slowdowns or bottlenecks along the way.
ReconVelocity offers software that aids used car dealership management as they track the reconditioning process. The result: Vehicles reach the market faster and, therefore, have the opportunity to sell before cost erosion reduces your profits. Speak with a recon expert by calling us at (850) 616-6294 or contact us online to request a product demo.