skip to Main Content

Rethink Your Used Vehicle Intake Process to Improve Profit Margins


Get maximum value for every car in your inventory with these 4 tips to help manage used cars more efficiently and increase profit margins.

Key Takeaways:

  • Used cars that go unsold for long periods can damage your dealership’s profit margins.
  • To get the best prices on used cars, you must monitor, evaluate, and optimize your inventory management process.
  • With a data-driven approach to inventory management, you can identify and correct inefficiencies in your inventory management process and find ways to prevent similar issues in the future.
  • Automotive reconditioning software provides transparency into all aspects of the recon process, and you can use it to continuously improve your inventory management.

Used car inventory that goes unsold for many weeks or months after acquisition can hamper your revenue growth. But, with effective inventory management, you’re equipped to get used cars on through recon and sold quickly to maximize profits. 

How to get the best prices for your used cars

You want your used cars to sell at prices as close to those associated with new models as possible. If you effectively manage your used car inventory, you can competitively price your used cars and optimize your inventory’s ROI. 

There are several things you can do to enhance your inventory management and get the best prices for used cars, including:

1. Identify which used cars your customers want

The longer used cars go unsold, the more their costs will deteriorate. Research indicates used car inventory cost erosion can be as high as $40 per day, so you could lose hundreds of dollars each week a used car remains in your inventory. 

Conduct research to find out which cars your customers want. Collect and analyze data to determine which cars are the top-selling models at your dealership, how quickly different models sell, and to gain other relevant insights. You should also perform local research and customer surveys to learn about used car demand in your area. 

Don’t forget to research recently sold prices for different types of cars, too. CARFAX and other online tools can help you price used cars based on real-time data, so you can accelerate sales and grow profit margins. 

2. Leverage inventory management metrics

Effective inventory management requires data analysis. Fortunately, there are many tools that will help you track the right metrics to understand the performance of your inventory management process and find ways to constantly improve it. 

Metrics you can use to monitor and evaluate your inventory management process include:

  • Inventory turn rate: Review in-stock inventory versus monthly sales; ideally, you want an inventory turn rate of 20 days or less.
  • Used-to-new ratio: Track the volume of used and new cars in your inventory; if there are more used cars than new ones, it may be a good idea to adjust your reconditioning process and pricing to encourage quicker used car sales.
  • Aged wholesale loss: Determine the total amount lost if a car goes unsold for many weeks or months; you should try to keep this figure below 5%.

Establish processes to collect inventory management data and evaluate it regularly. You can then create reports to assess patterns and trends within inventory management data. Use this information to adjust your inventory management process and increase profit margins. 

3. Create workflows that keep inventory moving smoothly to sales

Inventory management workflows are processes that begin as soon as a used car is sold. They ensure your inventory is immediately updated, providing you with data to assess sales trends and manage future inventory. 

To create inventory management workflows, examine your current inventory processes. Find out how long it takes to update your inventory after a used car is sold. Identify all stakeholders involved in keeping your inventory up to date and any bottlenecks that hinder communication and collaboration between these stakeholders. 

Use that evaluation of your inventory processes to establish workflows that define exactly what needs to happen to properly renew your inventory after a used car is sold. Monitor these workflows and collect and evaluate stakeholder feedback. That way, you can establish efficient inventory management workflows and fix overly complex processes or bottlenecks that damage your profit margins. 

4. Revamp your recon process

You may have limited time, energy, and resources to invest in recon. Yet, if you put your recon process on the back burner, you will miss out on opportunities to bolster profits. 

Simple ways to improve your recon process include:

  • Choose cars that require little to no bodywork: Select cars that require minimal exterior repairs over those with dents, dings, and other body issues for your inventory. 
  • Target aftermarket parts: Identify aftermarket parts that offer exceptional quality and lower prices than their OEM counterparts. 
  • Avoid outsourcing: Have certified auto mechanics on-hand who can perform car repairs and maintenance upon request. 

Recon software can bring transparency to your recon process as well. This kind of platform can help different departments see a newly acquired used car’s status in the recon process and stay up to date with one another throughout that journey. Over time, the software can help you reduce recon expenses, increase inventory turn, and boost profit margins. 

Why now is the right time to rethink your inventory management process

Inventory management can be challenging, but these 4 tips will help you rethink your inventory management process and make it more transparent and efficient than ever before. In addition, if you leverage the right tools and software, your inventory management process can help take your profit margins to new heights. 

ReconVelocity provides a turnkey platform to help you automate your recon process. Our tool lets you track your used cars at every stage of the recon process via a mobile app. In doing so, it can help you reduce time-to-market, increase profit margins, and more. 

We are happy to discuss our recon software and how your dealership can benefit from it. Our recon experts are available to answer your questions at (850) 616-6294, or you can request a product demo online.

Back To Top