I want to caution dealers that it is not just about stocking what is hot in the market. I’ve seen dealers get caught up in the market hype and end up sacrificing gross and retail sales by doing so.
Do dealers need to be in tune with what appear to be the “hot sellers” in the market? Absolutely. Is that the only factor they should be looking at? Absolutely not. When looking at “hot in the market” vehicles, dealers need to understand the data supporting that. Is it internet listings? How accurate is that? Are you driving the current market on particular models? If so, you begin to compete with yourself and relinquish valuable gross on vehicles you cannot replace for the same money.
Dealers need to first evaluate their business model and how they run their business and understand what has worked for them. Next, when looking at “what’s hot in the market,” you need to not only look at the number of listings, but how many actual retail transactions have occurred in your defined market. In addition, you need to look at the profit potential for those vehicles. If you see that there are 250 Honda Accord listings and 75 have sold in the last 30 days in your market, but the average profit on those is only $750 and you have no experience with the vehicle, is it something you’d really want to stock? Would a Ford Fusion with a sales rate of 120, days’ supply of 30, carrying gross over $1600, and three previous customers driving that car with equity that you can call be a better fit? Smart acquisitions will drive your “net” and unit sales to levels you think are unreachable!
For vehicles that support a dealer’s business strategy, obviously you would want to source those vehicles as cost-effectively as possible. The best way to do that is to look at the sourcing options you have available:
- Mine your customer database—both sales and service.
- If you’re part of a group—look at sister stores (intra-group trading can help drive gross and reduce wholesale losses).
- Missed appraisals—look at recent appraisals that you didn’t win, maybe reach out to those customers and “step up” on the trade, getting the vehicle you need and a sale.
- The auctions—online and physical (target vehicles that are front-line ready, reducing reconditioning time and expense).
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