Cars, Consumers & Credit Cycles – Webinar with Tom Webb

https://www.youtube.com/watch?v=udlY8Lrm3fo

 

Tom Webb discusses the used car market, the economy and automotive trends for 2017Economic and industry factors can have a significant impact on any industry. In a recent webinar, Tom Webb—chief economist for Cox Automotive—discussed industry and economic factors that will likely impact the used car market in 2017.

Economic Conditions
The two dominant economic factors that typically determine the health of the used car market are the labor market and credit conditions. Total employment saw less growth in 2016 than in previous years. However, that was to be expected given that the start of the year had an official five percent unemployment rate. Extremely weak wage gains and low productivity growth labor participation rates remain at 40 year lows. Despite those negatives, conditions remained favorable for the used car market primarily because of stability. Jobless claims are at an all time low, and Webb is hoping 2017 will bring a much needed increase in wages and job growth for car consumers.

Auto Loans
Auto loans from 2011-2016 experienced a 58 percent increase. Though household income and wealth has not increased significantly, low interest rates, a shift in consumer financial obligations and longer loan terms have changed a consumer’s ability to purchase vehicles and pay back their loans.

Used Vehicle Retail Sales
Combined sales of used vehicles increased for franchised and independent dealers for the seventh consecutive year. At this point in the cycle, used vehicle sales have shown faster gains than new vehicle sales. Independent dealers normally gain back a little share from franchised dealers around this time because wholesale supplies open up.

Better mix of vehicles coming to auction
Because wholesale supplies open up, like the sale of rental fleets and the increase in off-lease vehicles, will mean a better variety of vehicles will be coming soon to auctions and other inventory sources. The diversity of vehicles available in terms of make, manufacture, color and model mean that dealers will have more choices and chances to find the vehicles their customers want.

If you are interested in learning more about current economic conditions and trends in the automotive industry, watch Tom Webb’s Webinar.

Benefits of Floorplan Companies Holding Titles

stack of titles floorplan companies hold

stack of titles floorplan companies holdWhen dealers begin utilizing a floor plan to finance their purchases, initial concerns surrounding immediate access to vehicle titles may arise. Floorplan companies hold on to titles for the same reason salespeople will ride along with customers during a test drive: asset security. A consumer isn’t supposed to drive a vehicle off the lot without paying for it in the same way a dealer can’t have full possession of a title until the floored vehicle is paid off.

With this in mind, there are a few key reasons why having a floor plan company handle titles can be extremely beneficial for a dealership.

Reduces overhead for dealers
Dealerships need to have a system in place to effectively handle and process titles. Handling titles is part of daily life for all dealers, and ensuring they are managed effectively is paramount to keeping the car buying process seamless for consumers. However, by allowing a floor plan company to hold titles, the potential for overhead reduction presents itself due to not requiring as many on-site title clerks.

Reduces risk for dealer
In addition to creating an opportunity for reduced overhead, allowing a floor plan company to hold titles could reduce risk for dealers as well. A vehicle cannot be sold without a title, so it’s imperative titles are kept in a safe, secure location to ensure they are never lost or stolen.

Most floorplan companies have extreme measures in place to ensure titles are kept safe and secure. At NextGear Capital, all titles are held in a secure, fire-resistant vault with cameras running 24/7. Additionally, NextGear Capital implemented an innovative solution that tracks the location of each and every title in their possession.

Still not comfortable with the idea of floorplan companies holding your titles?
Dealers working with NextGear Capital have an average call wait time of only 10 seconds before they’re connected with a customer service representative. The responsiveness doesn’t stop there! If a title is requested by 5 p.m., the requested title will typically arrive to the dealership by the next business day.

Though titles for floor planned vehicles might not be immediately available to dealers, they’re available for viewing through the myNextGear platform at any time. With titles arriving typically next day at the dealership—often from states away—having a floor plan company manage your titles just might be the best option for your dealership!

Best Practices of Managing Dealership Reviews

dealership reviews management best practices

Encouraging a car buyer to shop at a particular dealership reviews management best practicesdealership is no longer just a matter of simply being the closest dealership locally. For today’s customer, the car buying experience begins online. According to a study from Autotrader and Kelley Blue Book, car buyers spent 60 percent of their time online in the vehicle purchasing process. The time to influence where a customer shops begins with a dealership’s digital presence, and when a customer is deciding on a dealership to visit they are bound to run across a number of dealership reviews.

Feedback should always be appreciated, and review sites make earning dealership feedback easier than ever. In an industry where the digital experience can make or break a potential customer’s decision to purchase at a location, it’s important to monitor and respond to dealership reviews. Take the below best practices into consideration to ensure your dealership’s reviews encourage, and don’t discourage, potential customers from visiting your lot.

Monitor reviews
Take note of the review sites where your dealership has earned reviews. What are customers saying about the dealership? Are there any issues mentioned in the dealership reviews that can be addressed? Every dealer and dealership will have to decide how frequently they monitor and respond to reviews. Find a cadence that works best for the team member in charge of monitoring and responding to reviews.

Comment on reviews, both good and bad
Every customer leaves a dealership either satisfied or dissatisfied with their experience. For the customers that leave positive dealership reviews, make sure to thank them for their feedback. They took the time to share their positive purchasing experience with the rest of the digital world. While it might be tempting to just ignore negative dealership reviews or tell the reviewer why their opinion is misguided, it will better serve the dealership if the response asks to reconcile the negative experience with the reviewer.

Encourage feedback
Feedback can give dealers an idea of what they need to do to improve service for their customers. Be willing to ask customers if they would like to contribute a dealership review after their purchase. Their feedback can lead to valuable insights on ways to improve the dealership experience. Dealerships that ask for and implement feedback are more likely to be in tune with the wants and needs of their customers.

Though dealership reviews have the potential to influence a potential customer’s visit,  when managed correctly, those reviews can bring out the best qualities of a dealership, provide insight on dealership processes that could be improved and encourage customers to visit and purchase.

Need to Exchange Aged Inventory? Build a Local Dealer Network

Dealer selling a vehicle

aged inventory build a local network Aged inventory is a big issue for many auto dealers. Vehicles are depreciating assets, and if they remain on a dealer’s lot too long, they can tie up additional cash flow. Having an exit strategy for each vehicle that enters a dealership is essential. Typical places to dispose of stale inventory include auctions, Autotrader, OVE, SmartAuction, Craigslist, and Ebay, amongst other places. However, what can a dealer do if all of those options have been exhausted and their aged inventory hasn’t sold yet?

Consider taking inventory to the dealership down the road, or to the dealership the next town over. Building relationships with other dealerships in the area can be a valuable asset to any dealer looking to dispose of stale inventory. The old inventory of one dealer can be brand new inventory to another dealer.

So what can a dealer do to help build their local dealership network to dispose of aged inventory?

Get to know the neighbors
Building a network often means taking on the responsibility to be the first to reach out. Take the time to get to know other dealers in the area. They may be competitors, but they are also neighbors and peers in the industry and endure similar struggles.

Learn about their inventory preferences
Beyond just working to build a relationship, learn about the type of inventory they prefer to sell. What type of inventory do they have? What aged inventory might sell better at their dealership? Are there any inventory styles between dealerships that overlap? The aged inventory at one dealership could be a quick sell at another dealership.

Be willing to purchase aged inventory from other dealers
If other dealers in the area are willing to purchase aged inventory, be sure to return the favor. A willingness to purchase inventory from other dealers can encourage others to purchase inventory in return. Participation from all parties can make a local dealer network successful.

While it is not ideal to sell aged inventory to another dealer, leveraging a local network can allow a dealer to dispose of aged inventory, and become an inventory source for other dealers. Don’t forget, it’s an avenue to help manage cash flow, and ultimately overall profitability.

Automotive Floor Plan Management Best Practices

Dealer using First Gear

Once a dealer is cleared to use an automotive floor plan, automotive floor plan management tipsthey instantly have access to more capital to aid in purchasing inventory. However, along with that instant access to more capital is a new set of management responsibilities. Keeping these best practices in mind will help dealers integrate their new capital into their current business plans, allowing them to use their floor plan more effectively.

Fit the floor plan to the dealership
Dealers need to be aware of their own business numbers in order to optimally manage an automotive floor plan. What is the dealership’s average inventory turn time? How many cars need to be sold in order to meet operating expenses? What is the average profit margin per car? Knowing the answers to questions like these can give dealers key insights that help establish where they were, where they are going and how long it will take for a dealer to reach their goals. The answers to those questions can also provide clarity on how an automotive floor plan can fit into the current shape of the business.

Use floor plans for discipline
When a dealer uses cash or a regular business loan, there is no incentive to sell a car or profit quickly. Additionally, a dealer’s initial investment will depreciate depending on how long the vehicle stays on their lot. Floor planning can help provide a dealership with discipline. Dealers have a given amount of time available until they have to pay a vehicle off. Use that deadline to the dealership’s favor.

If a dealer hasn’t received a profitable offer on the vehicle due for payoff, that approaching deadline can jump-start their inventory exit strategy process. Whether that exit strategy includes selling the car at auction, working with other local dealers or holding out for a more profitable offer, the floor plan deadline ensures that a dealer doesn’t just let their inventory, and their initial investment, depreciate.

Always floor plan responsibly
A dealer’s business data combined with a floor plan can lead to excellent dealership profits. However, dealers need to make sure that they floor plan responsibly. If a dealer uses their entire line of credit and those vehicles haven’t sold once payoff time arrives, that dealer is going to have a pretty hefty bill. Space out inventory purchases. That way, payoff dates are spaced appropriately for dealership cash flow, just in case inventory hasn’t sold before payoff time.

Used together, these best practices allow dealers to purchase the inventory needed, provide incentive to profit and allow for manageable floor plan payments.

Auto Floor Plans vs Cash: What Cash Buyers Lose When Buying Inventory

auto floor plans vs cash

Every dealer has a preference on what type of auto floor plans vs cashcapital they use to purchase inventory. Each dealer has the choice to use either the cash they have on hand, to use auto floor plans, or use the loans they’ve secured from banks and other financial institutions. Each form of capital comes with its own risks and rewards. However, dealers that primarily use cash could be missing out on some of the benefits an auto floor plan can provide.

The Cash Conundrum
Let’s say someone asks a dealer to invest $10,000, and also makes the personal guarantee that the money invested today will be worth $50 less the second the money is deposited. Of course, a discerning dealer would think twice about making that investment. However, what some dealers don’t realize is taking that deal is exactly what happens when they pay cash for their inventory.

From the beginning of the inventory / retail stocking process, dealers are utilizing capital. At auction, the reason a dealer will win a bid is simply because they were willing to pay more than anyone else. This is of course, a calculated risk. Often, the dealer’s sale of their auction purchase will result in a profit. However, there is always the possibility that the purchased car won’t sell.

Any car purchased will eventually depreciate in value. The longer a car sits on a lot, the more that car will depreciate. Purchasing a vehicle with cash means that the money initially spent on the car will also depreciate, and the vehicle will eventually be valued at less than the dealer’s initial investment. In addition, purchasing inventory with cash will limit a dealer’s options to keep their money working for the business.

If a car sits on a dealer’s lot beyond 60 days, the dealer will likely be pretty motivated to sell that particular vehicle. However, at this point, the dealer’s cash is now tied up in the vehicle. Purchasing another vehicle isn’t a possibility. In addition, the dealer isn’t likely to earn back their initial investment if they try to re-sell the vehicle at auction. When the dealer first won the unit at auction, they were already willing to pay more than anyone else.

The time the vehicle spent on the lot didn’t increase the vehicle’s value either, so the dealer is already facing a loss. It also doesn’t help that the dealer doesn’t have time to wait for a buyer. In order to purchase another car that is a better position to sell, a dealer needs cash and they needed it yesterday.

But doesn’t the same thing happen when using auto floor plans?
Technically, that same vehicle will still depreciate whether or not a dealer uses cash or a floor plan. However, when a dealer uses a floor plan they have more options available than if they paid cash. With a floor plan, a dealer can pay a small amount of the car off at a time, they can extend a vehicle, or they can buy down their depreciation over a period of time. With a floor plan, a dealer has extra capital on hand to ensure their ability to purchase more inventory.

At NextGear Capital we recommend a dealer’s budget for stocking inventory to be a 70/30 mix of their floor plan and cash, respectively. Using a floor plan to stock inventory ensures a dealer can buy enough vehicles to meet the needs of their market, and the cash on hand ensures a dealer can pay for their expenses.

Buying inventory with cash can limit the actions a dealer can take to help their dealership profit and succeed. However, auto floor plans give a dealership the capital and flexibility needed to purchase the desired inventory for their market.

Basic Factors That Can Make or Break Used Car Dealership Success

Car dealer speaking to a customer

Drawing customers to your used car dealership used car dealership successand keeping them engaged relies on a number of factors. How effective were your marketing efforts? What inventory do you have in stock? Is the vehicle priced appropriately for the buyer? Beyond these few questions, there are often overlooked factors that go beyond your dealership’s vehicle purchasing experience that may be preventing you from leaving a positive impression on customers and hurting your chances at growing your customer base.

Keep your inventory aligned with the wants and needs of the market
Stocking the inventory your market wants is a somewhat-invisible, but important component of used car dealership success. Staying in tune with what your customers are purchasing allows a dealer to pivot inventory quickly and seamlessly, and ensure that your lot is stocked with the vehicles your customers are looking to buy. If you don’t have the right vehicles to capture your customer’s interest, they are likely to move on to another used car dealership. The different wants and needs of your market will dictate the way your dealership spends its time and resources on inventory.

Minimize hand-offs to multiple staff members
Potential buyers don’t like to repeat themselves to multiple staff members. In addition, it can be frustrating or confusing for a potential buyer to get passed around from department to department. Take note of your current sales process. How many times is a customer passed from one department to another? Can you reduce that number? A customer most likely won’t notice if they stick with one or two different staff members. However, if they get shuffled around to more it is possible that they’ll get frustrated with the sales process and possibly leave.

Keep your dealership presentable
Ensuring that your dealership is clean and presentable can change a customer’s entire perception of your dealership. While it is perhaps a small and basic part of running a dealership, it can set the tone and leave a lasting impression on customers. A customer won’t notice a clean office or clean inventory, but they will notice an unkempt office and muddy vehicles. Clean cars with fresh interiors will always leave a good impression. In addition, visible pricing and a well lit lot ensures that customers can easily navigate your dealership and their potential vehicle options within their price range.

These overlooked, yet noticeable, components of a dealership can make or break a customer’s perception of your lot, and could potentially be the difference between a one-time customer or a repeat customer.

Staying Committed to Community Throughout 2016

CANstruction volunteers work together to build Olympic rings out of canned goods

At NextGear Capital, 2016 brought a continued focus on serving not only our clients but also the communities in which our team members live and work. Led by Patty Turner, Senior Director of Corporate Administration, the Community Relations team thrived on not only sponsoring events financially, but by staying committed to community and volunteering our time. Because of this, 2016 was a record breaking year of fundraising and volunteering for NextGear Capital. Each month, team members at the corporate office, as well as in the field, had an array of volunteer and fundraising opportunities in which they would choose to participate to give back to their communities.

Quarter one started the year out strong with a Cox committed to communityAutomotive initiative, ‘No Excuses’. Every year, Cox Automotive and its brands dedicate time in March giving back to the community – no excuses. NextGear Capital alone was able to serve 80 unique organizations nationwide. In March alone 336 team members volunteered by donating 48 pints of blood to the American Red Cross, making 50 blankets for Project Linus, hand-making 278 dog and cat toys for the Humane Society for Hamilton County, packing 10,000 meals for Stop Hunger Now, and sorting approximately 9,400lbs of nonperishable food items for Gleaners Food Bank of Indiana. Field team members were able to put together 7 team-building volunteer events across the nation, from serving at the Houston Food Bank to the Ronald McDonald House here in Indy, they made no excuses to find time to volunteer together.

committed to community

 

The biggest fundraiser from the first quarter was the Polar Plunge, which team members participated in on behalf of the Special Olympics. Over $3,600 was raised and 11 NextGear Capital team members plunged into the freezing 10°F water of Eagle Creek Reservoir on March 5. Finishing the quarter with 2,230 hours volunteered among 371 volunteers was nothing short of impressive. With both corporate and field team members committing to their community, a total of 359 unique events were supported throughout the three month span.

Quarter two had a lot to live up to and it did not disappoint. With over 1,700 volunteer hours recorded, 272 NextGear Capital team members participated in 260 volunteer opportunities. committed to communityNextGear Capital team members worked together to raise $5,215 for the 2016 Tour de Cure, a series of funds-raising cycling events held in forty states nationwide to benefit the American Diabetes Association. Although not an actual race, the bicycle ride raises funds for diabetes research. Additionally, NextGear Capital participated in Cox Automotive’s initiative ‘Drive Away Hunger’. NextGear Capital team members donated 12,766 pounds of nonperishable food items, producing 12.8% of Cox Automotive’s total donation goal. NextGear Capital field team members were able to raise an astonishing 3,280 pounds of the committed to communitydonated total, 797 of which were donated at Manheim auctions. The bulk of the donations came from the Great Lakes, South West, North Florida, Mid-Atlantic and North Central regions; making it clear the field team members were truly dedicated to driving away hunger. The NextGear Capital Canada office raised 260 pounds and the UK office was able to pile an impressive 679 pounds, donating their nonperishables to the Mississauga Food Bank and West Cheshire Food Bank, respectively. The 4.2 tons of nonperishable goods collected at the corporate office were donated directly to Gleaners Food Bank of Indiana.

committed to community

 

To round out the quarter, NextGear Capital played an active role in the Circle City Indiana Pride Parade. Participating for the second year in a row, team members fought the sweltering heat and marched with a multitude of motivators. Approximately 75 team members showed up in support of the LGBTQ community to celebrate diversity.

Momentum did not falter as the year progressed. committed to communityQuarter three introduced not only a new season, but new volunteers, as well. In early July, the NextGear Capital interns banded together to put on a sort of garage sale, dubbed the “Swag Sale”. They asked NextGear Capital team members to dig deep into the back of their closets to find gently used, pre-loved NextGear Capital gear that they no longer wore, as well as prompting those in leadership positions to donate new swag. By the end of the day, the formerly saturated room was depleted. The interns viewed the experience as nothing short of a success, especially after they learned Cox Automotive was providing a generous matching gift, raising the total to $9,270 for Big Brothers Big Sisters of Central Indiana.

committed to communityAnother success story lies within NextGear Capital’s participation in the Cox Automotive national partnership with St. Jude Children’s Research Hospital. NextGear Capital’s corporate team, as well as Autotrader, Manheim Indy and vAuto teamed up to be the Flagship sponsor for the annual St. Jude Walk/Run to End Childhood Cancer. The Cox Automotive brands were named the Grand Marshall and led all 600 participants in the walk through downtown Indianapolis. The team worked diligently, and came in first place in overall top fundraising teams. NextGear Capital field team members did an incredible job representing in their respective territories, as well. Across the country, team members got together in their regions and participated in the walk with other Cox Automotive brands. Team members from Indianapolis to Los Angeles helped fundraise, as well as walk to support the end of childhood cancer.

woof itFinishing up the year, quarter four had a lot to live up to. While the year was coming to an end, community relations did not, and has not, slowed down. To start off the final quarter, NextGear Capital partnered closely with the Humane Society for Hamilton County, launching a six week fundraising and volunteering campaign for the shelter. Naming every Wednesday “Woof It Wednesday”, volunteer opportunities and fundraising events were held weekly. Throughout the duration of the campaign, there was a coin war continuously running. In-house volunteer opportunities such as cage blanket making and dog toy making, and external volunteer opportunities such as spending an afternoon at the Humane Society for Hamilton County volunteering, were all a part of the campaign. With fundraising and volunteerism combined, NextGear Capital was not only a presenting sponsor of Woof It & Hoof It, but was able to make a total value impact of over $11,000.

Additionally, NextGear Capital team members have chartered a chapter of Cox Automotive’s initiative, Women With Drive. Women With Drive, originally launched in April 2015 as a Cox Automotive initiative, was developed to reach three main goals: to support community outreach to address the unique needs of women, to establish a forum for networking and sharing ideas related to personal and professional development, and to empower women across Cox Automotive and the automotive industry at large. Women with Drive creates a community focused on the personal and professional development of women at all levels within Cox Automotive.

team standing

 

Women With Drive held a two week supply drive with proceeds benefitting Girls Inc., a local nonprofit organization that focuses on instilling confidence in girls. Since 1945, Girls Inc. has focused on responding to the changing needs of girls in their communities. Our field team members truly outdid themselves in the fourth quarter, as well.

 One of their most notable efforts was supporting the Red Cross in their efforts to aid those affected by the Louisiana flooding. Field team members took it upon themselves to help raise funds and collect desperately needed items to donate to those affected by the devastating and widespread flooding. The North Central region donated approximately $1,340 directly to the American Red Cross, while the South Central region made donations directly to the flood victims. Truckloads of clothes and Wal-Mart gift cards have been driven to Baton Rouge weekly for the past few months. The South Central region is still making trips to help those affected by the devastation. To wrap up the year, NextGear Capital team members adopted ‘Angels’ in support of The Salvation Army’s annual holiday fundraiser, “Angel Tree” program. NextGear Capital team members understand that every holiday season there are children whose families are struggling financially and cannot afford the expenses associated with buying gifts for their children. To help support these children and their families, team members rallied to support 23 ‘angels’. Raising approximately $200 per child, team members went all out to make this Christmas one to remember for the children. The Business Assurance and Advisory Services team also held a team-building volunteer activity at the annual Angel Tree distribution day, where they helped distribute gifts to the parents of the children enrolled in the program.

I’m so proud of all of the NextGear Capital team members who went above and beyond this year to support so many great organizations in our community. Because of their hard work and commitment, NextGear Capital was able to have a record-breaking year in both fundraising and volunteering and we look forward to continuing our impact in 2017.” -Patty Turner, Senior Director of Corporate Administration.

NextGear Capital takes pride in promoting volunteerism and fundraisings opportunities to our team members, but it is also everyday habits that truly make a difference in the community. Playing an active role in organizations such as the Indiana Chamber of Commerce, the Indianapolis Chamber of Commerce, the OneZone Chamber of Commerce, the Indy Rainbow Chamber of Commerce and the Carmel Green Initiative allows NextGear Capital to consistently aid and assist the local economy in any way that it can. Giving back isn’t just about donating time or money, it means giving back to our earth as well. The OneZone Chamber of Commerce recently announced NextGear Capital as the winner of the annual Green Award for sustainable efforts in Carmel, Indiana. NextGear Capital has pledged to become a zero waste-to-landfill organization by December 2017. Being at an 84 percent diversion rate, meaning 84 percent of all waste is either composted or recycled, NextGear Capital is confident in our ability to attain this goal.

Monthly rotating trips to the Ronald McDonald House of Indiana, Gleaners Food Bank, and the John H. Boner Community Center allow team members to take time from their busy schedules and focus on helping others struggling within their community. Instead of zip-lining or participating in a thrilling activity, team members in the field are replacing these common teambuilding activities with a group volunteer project at their quarterly region meetings. NextGear Capital strives daily to find new opportunities in which it can become further involved in our local community. Looking forward to a strong 2017, NextGear Capital is planning now to make it the best yet!

Seasonal Wholesale Prices Drive Dealers to Stock Up

dealer inventory

NextGear Capital and Manheim Offerings Compel Clients to Maximize Floor Plan Purchasing Power

Savvy dealers tracking seasonal wholesale prices and readying for buyers who use their tax returns to purchase vehicles are stocking up on inventory now. To do so, many are turning to NextGear Capital and Manheim to maximize their floor plan purchasing power.

According to Cox Automotive Chief Economist Tom Webb, the Manheim Index — which tracks monthly wholesale prices back to 1997 — reveals a “seasonal pattern with low points in October and November and price increases in January before peaking in April.”

Dealers utilizing a NextGear Capital line of credit can purchase inventory and take advantage of the extended terms. The flexible repayment period enables clients to make vehicle payments later, maintain cash reserves and purchase stock before seasonal price increases occur.

To ease dealers’ concerns about buying too early, Joe Lescota, director of dealer development, National Independent Automobile Dealers Association, suggests, “Dealers can take advantage of floor plan services, such as NextGear Capital, to prepare for the busier time of the year, as well as seek alliances with those who can help them make better buying decisions.”

Lescota, drawing on his 25+ years of industry experience, encourages dealers to learn about pricing in their individual markets before purchasing vehicles, in anticipation of tax season or any time of the year. “Resources — such as vAuto, Polk Reports and Autotrader – can identify which units turn in the shortest period of time in their area, as well as which flooring units have the highest gross earning potential.”

Manheim also provides acquisition resources to help dealers improve vehicle procurement and identify optimal stock to offer on their lots. Its team of professional buyers enable clients to maximize value during every step of the car buying process – from development of a tailored purchasing plan to vehicle acquisition to management of back-end processes after stock is obtained. These services enhance dealers’ productivity and free up their time to concentrate on customer-facing activities, while reducing risk and costs associated with in-house acquisitions, such as travel and staffing.

Developing An Exit Strategy for Aged Used Inventory

Aged Used InventoryAfter buying a vehicle at auction, do you ever think to yourself, “What am I going to do with this unit if it doesn’t sell fast enough?” If you don’t, you might be hurting your own chances at profitability.

Holding on to aged used inventory can tie up your cash flow because you are holding on to a depreciating asset. Disposing of an older vehicle can help to free up the cash flow you need to purchase a unit more likely to sell. Associating an aged used inventory exit strategy to each unit mitigates against aged inventory and helps to create an efficient ecosystem that allows you to maximize dealership profitability.

While every exit strategy will differ from dealer to dealer, the three following questions are designed to help guide your thinking when developing your own aged inventory exit strategy.

Do you have a strategy for different inventory age points?
Developing a process or an exit strategy for vehicles at 15, 30, 45 and 60 days gives you a solid idea of what to do at any point in a vehicle’s lifecycle on your lot. For example, for a unit at 30 days part of your plan could be to detail some of your 30 day inventory, relocate units to another part of your lot and reevaluate your pricing.

What is your unit breakeven point?
Every dealer needs to decide for themselves what each unit’s breakeven point is. While holding on to inventory for 60 days is a typical industry standard, often by the time you get to that 60 day point, your unit could be on the edge of a profit or loss. A comprehensive exit strategy gives an overall structure to your inventory, but also allows for flexibility if needed.

Where can you dispose of aged inventory?
Keep note of the different places you source your inventory and the different places you can also get rid of aged used inventory. Some solid places to dispose of inventory includes auctions, exchanging inventory with your local network, Craigslist, Ebay, Autotrader, Cars.com, OVE, and SmartAuction. If you can also match your inventory to the sources that would be most likely to give you the best price for your units, you’ll put yourself in a better position to get rid of your aged inventory.

Developing an exit strategy for aged used inventory won’t be a simple task. However, the sooner a plan is developed for your aged inventory, the sooner you can free up capital and start improving your profitability.