Aged inventory is a problem for each and every dealership. Holding on to aged inventory means your dealership cash flow is tied up into a rapidly depreciating asset. Though utilizing a floor plan can help to prevent your cash from depreciating, creating an inventory exit strategy is essential to ensure a dealership ecosystem of efficiency and profits.
Exit Strategy Planning
Your exit strategy will need to kick in from the moment a new vehicle arrives on your lot. Streamlining your dealership’s reconditioning process can help get a new car out on the lot in a hurry and decrease the amount of time you’re tying up cash in something you can’t sell yet.
Inventory Age Points
At what point does a vehicle begin to get stale, and how long is its life cycle on your lot? Plotting out a strategy that automatically moves these older vehicles through an exit process can help take guesswork out of what your dealership should do at certain points in time. Exit activities could begin at 15 days and increase at the 30, 45 and 60-day marks. For example:
- At the 30-day point, your plan could include moving some vehicles to a fresh new location on your lot.
- At 45 days, move aged vehicles to the front line of your dealership’s lot, detail again, and evaluate the current price.
- At 60 days, incentivize your sales team and prepare to move the vehicle to preserve profits.
Where do you break even?
Hopefully, a fully defined exit strategy in place will help prevent any vehicles from reaching the industry average of 60 days on a dealer’s lot. However, in the case some inventory reaches that point, dealers will need to decide for themselves what individual vehicle break-even points are.
What can you do with old, unsold inventory?
The places you source your inventory may also be useful when you need to dispose of a vehicle that just didn’t work for your client base. Auctions, a inventory exchange with your local dealer network, Autotrader, OVE and other sources can help you get rid of aged inventory and reclaim the cash you have tied up in these older vehicles.
Casting off aged inventory that didn’t sell isn’t easy or fun, but it will benefit your dealership long term. Careful planning and attention to your full exit strategy will help you free up more capital, improve your profitability, and hopefully fill your lot with activity and fresh new models for your customers to enjoy.