The faster you get used car inventory on your lot, the greater your profits. That’s why measuring and improving your time-to-market is essential to improving your bottom line.
Very few aspects of running a used car dealership are more critical than getting inventory on the lot quickly. Cars start degrading in value the second you acquire them and have a short window where you can fetch a premium price. If a vehicle isn’t even on the lot, there’s no way you can sell it.
Nonetheless, every vehicle you acquire will have to go through the necessary procedures to ensure it’s safe and running correctly for customers. The last thing you want is to develop a reputation as a dealership that sells subpar automobiles.
Dealerships need to establish protocols and standards for getting cars to market quickly without sacrificing the quality of the products on your lot.
One step to improving time-to-market is tracking each car’s route from acquisition to your sales lot to see where you can optimize the process. By monitoring your vehicles through the inventory prep process, you can get them on the market more rapidly and increase profits.
Here’s what you should know about tracking and optimizing the time-to-market for your used car inventory.
Things you’ll want to track
Various elements go into preparing a vehicle for sale. A proper recon strategy includes more than installing new tires or detailing the interior, as you must be 100% certain that each car is in optimal shape before selling it to a customer.
Keep an eye on every part of the process, including the location of every car in your possession, how close each vehicle is to sale-ready status, and the reconditioning cost.
The more information you collect as the car moves through your reconditioning stages, the easier it becomes to hold various departments and vendors accountable.
You should also have a clear idea of the average time it takes a car to reach sale-ready status from the day of acquisition. The more information you collect, the easier it becomes to develop solutions to potential bottlenecks.
How long should it take to get a vehicle to market?
It depends on a variety of factors, and every car will have unique challenges to overcome. Still, you want to get them out there as quickly as possible to maximize profit.
The average car has a 21-day window where you can get full value on the sale. That’s because there’s a market shift every three weeks or so that could make certain vehicles less appealing to buyers than they were when you acquired them. If it takes ten days from the acquisition date to get a car on the lot, that cuts your premium sale window in half.
A ten-day average isn’t ideal because it means you’ll have to sell each car very quickly after it reaches the lot to maximize profits. This scenario puts unnecessary pressure on your sales team to pick up the slack and make up for inefficiencies that aren’t their fault.
Ideally, every vehicle you acquire should be on the lot in less than three days, a timeline that some reputable dealerships are achieving. The shorter the recon time, the more inventory turns you can accomplish each month, and the more money your dealership stands to make.
A look at holding costs
Beyond the market shifting every 21 days, your holding costs also cause price erosion as a vehicle sits unsold and unviewable for customers.
Estimates on the exact amount vary, but generally, you can expect a car to cost you between $36 and $50 every day you don’t sell it. If you have 25 vehicles moving through the recon process at any given time, you could lose over $1,200 per day just in cost erosion.
It’s in your best interest to reduce your holding costs by decreasing the time-to-market as much as possible. Tracking the process as your team gets vehicles ready to hit the lot is essential because it allows you to see where things are slowing down and address these inefficiencies right away.
How to optimize time-to-market
Figuring out how to optimize your time-to-market is a challenge because there are many cogs in the wheel. It becomes complicated if you’re managing multiple lots, too, because manually tracking every vehicle becomes next to impossible. However, there are tools available to help along the way.
ReconVelocity provides automating software that general managers and dealership owners can use to track and optimize the reconditioning process from start to finish. This tool allows you to automate much of the record-keeping and it uses GPS to track exactly where every vehicle is at every step in the process. This level of transparency reduces your time-to-market and maximizes profits on every vehicle you acquire.
Our recon experts are standing by to answer your question at (850) 616-6294, or you can request a product demo online.