After 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.