If you avoid it you don't have to correct it.
In the last issue, we discussed ways of correcting an aged-inventory problem. Having dug your way out of that hole -- or even while you are doing so -- you will want to install some prevention policies to avoid getting into an aged inventory problem once again.
  Following are some tips that top-performing used-vehicle operators from across the country have used.

Set a deadline for disposal
Perhaps the most difficult policy that you will have to adopt in managing your used-vehicle inventory is deciding on how long to keep a unit in inventory. Most dealers will either wholesale or auction off a unit once it has aged to a pre-determined point. Some dealers use a 60-day time frame; others may be longer or shorter. Regardless of your decision on a specific time frame, once that is decided, make it a hard-and-fast rule that every unit must be disposed of after this deadline.

The dealer principal himself should be the only one making an exception. (For example, a convertible purchased in January for the spring market, 4x4's purchased in the summer for the fall market, etc...) Most dealers set up a reserve that they use precisely for these situations.

Be pro-active
The best way to control your inventory and reduce the number of aged units is to be pro-active and stay on top of your inventory on a weekly basis. Once a vehicle has reached 30 days in stock, it is time to examine why it hasn't sold. Thoroughly inspect and drive the vehicle, search for flaws, and revisit your pricing to ensure that you are not over-priced in the current market for this unit. If there is no discernable reason why the vehicle hasn't sold, try moving it around the lot. For example, providing it with a different location may give it an entirely different look.
 
When a vehicle reaches 45 days in stock, it's time to put a solid action plan in place to move this unit quickly.
- Re-clean (detail) the vehicle if needed
- Revisit your pricing on the vehicle
-Advertise the vehicle ( split ads work well here )
- Have someone execute a walk around presentation on the vehicle
- Bonus or spiff the unit
- Consider wholesale bids

There is no doubt that wholesaling a vehicle at this time will result in a loss; however, there is an old saying that "the first loss is always the least."  You won't always eliminate 90-day units but by observing some of these steps at the very least, it will help reduce them.

Inventory control hit list
Keeping track of the number of times that a vehicle is presented and demonstrated to a potential buyer can give you valuable input into the saleability of any unit in your inventory. Obviously, if a vehicle is getting "hit" without sales results or not getting any hits, there is usually a problem with it. Things to consider include:
- Pricing
- Reconditioning
- Market conditions
- Advertising
- Type of vehicle for your brand, etc.......

Elements to understand
To maximize your used-vehicle volume and profitability, you should also ensure that your used vehicle manager has a firm understanding of the following elements:
- Special Financing
- Purchasing / Appraising
- Product Mix
- Reconditioning
- Pricing To Sell
- Inventory control
- Merchandising
- Advertising
- Special Events
- Closing Techniques / Desking
- Daily Checklist
- Establishing A Used Car Policy

Days supply
The ideal days supply for a used vehicle department is 30 days of "retail-ready" inventory.  Expressed in simple terms, if you retail 35 units in a month, you should operate with approximately 35 vehicles on your lot.  Your inventory list may show 45-50 units taking into account wholesale vehicles and vehicles currently in the reconditioning system.

Minor exceptions can be made to this 30-day guideline for special purchases, a planned sales event, or bulking up for stronger selling months. If you tend to overstock your lot, your gross could suffer as a result of the time it takes to move the extra units. There will also be occasions where you may want to take advantage of buying in an "off-market" to purchase vehicles in advance of an upcoming market ( buying before the market actually hits for certain vehicles ). Preparing a detailed sales analysis can be a good reminder as to what sells on your lot and how to balance your inventory.

Regardless of the size of your operation, proper management strategies and policies will allow you to have a profitable used vehicle department that will support your new-vehicle and fixed-operations' departments. Say goodbye to aged inventory for good! Good luck and great selling to you!

Hector Bosotti is a sales trainer and consultant for Wye Management with over 23 years of retail automotive sales and management experience. He trains salespeople, business managers, and sales managers from coast to coast.  He can be reached at 1-888-993-6468 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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