How to Cost-Effectively Source the Vehicles You Need

A key component of your dealership’s inventory management strategy is vehicle sourcing. Yet current conditions make sourcing the right mix of vehicles more difficult than in past years. With floor plan sources more restrictive and consumer spending still down, many dealerships just like yours are grappling with reduced funding, fewer vehicle sales, and fewer trade-ins. As a result, it is an optimal time to look beyond trade ins as a primary source of used vehicles and explore cost-effective alternative sourcing options.

Before we delve into sourcing options, it is essential to remember that you need to stock the right mix of core inventory. Core vehicles are those which are proven, repeatable winners for your dealership; they sell consistently for more than average margins. There are inventory systems on the market that can help you identify your core or you can start by simply recording sales information.

Just as critical as the vehicles you source is your remarketing strategy. If you don’t have tactics in place to create demand, vehicles will sit and cost you money. A sound remarketing strategy takes into account a model’s past sales performance and aging history, as well as the current market demand and residual value. Because of the high degree of ambiguity (condition/miles/age/desirability) for used vehicles, they are a unique commodity for which you must create demand.

Once you nail down the vehicles that are best for your dealership and fine-tune your remarketing strategy, the first cost-effective sourcing option to consider is your own database. Pull information on customers that have purchased a desired vehicle from your dealership over the last five years. Also look to your service department and identify needed vehicles coming into the service drive that have positive equity. You can solicit both of these sets of customers to trade in their vehicle, resulting in additional sales and the used vehicles you need

A second option is intra-group trading. If your dealership is part of a multi-store group, communicate at the group level to identify vehicle needs and then transfer inventory accordingly. This keeps acquisition costs low and reduces wholesale losses.

A third option is to review lost appraisals. Pull a list of completed appraisals for the past 30 days for the specific make/model that is needed. You’ll have a targeted list of customers who can potentially be brought back into the sales cycle.

Finally, sourcing at auctions can be a viable cost-effective option. Utilize both physical and online auction channels to help streamline your searching efforts. When you buy at auction, consider what services are offered to get the vehicle frontline-ready. Purchasing vehicles that are frontline-ready leads to quicker turn times.

No matter where you source your vehicles, a sound buy and sell strategy that includes best practices for sourcing your core vehicles and remarketing those vehicles can help you sell more vehicles faster. This is an integral part of inventory management and can help your dealership gain a competitive edge to remain consistently profitable.

Doug Hadden is strategic sales and optimization manager, DealerTrack Inventory Optimization. With more than twenty years of retail automotive experience, Doug understands dealerships and what it takes to make them successful. For more information, please contact DealerTrack at 888-251-0401.

Doug Hadden

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