The state of used cars is ever-changing. A few weeks ago, articles like “The Pandemic Used-Car Boom Is Coming to an Abrupt End“ published in The New York Times discussed how used car demand and resulting prices have fallen, putting pressure on used car dealers and companies like Carvana. However, on February 18, 2023, an article on CNN showed how used car prices have risen again. As the used car market continues to mimic the trajectory of a roller coaster, inventory management will continue to play a pivotal role. Here are a few best practices for winning at used vehicle inventory management.
1. Invest in a Robust Inventory Management System
You may already have a used car inventory management system, but you always want to evaluate whether your current system is working for you or if you need to update your software. The ultimate goal is for your management system to give you the data you need to be agile and make impactful decisions regarding your used car inventory.
Your inventory management system can help you to start seeing trends with your used inventory and track each model’s journey from acquisition to sale. You can more easily search various models, implement bulk pricing strategies, and compare used vehicle performance at your dealership to others in the market. It can even help with the next best practice.
2. Determine Your Used Vehicle Market
While the CNN article above points to another drastic change in inventory prices, your local area might be going through a different situation. You might be thinking of questions like:
- What used vehicles are the most popular in the area?
- Are customers growing more price sensitive?
- Are used electric vehicles growing in popularity locally?
Tracking your used vehicles’ paths can enable you to see the types of used cars to invest in for the greatest return on investment. Understanding your used vehicle market also allows you to make projections about future demand and make effective strategies for moving forward.
3. Perform Regular Analysis
You want to know what’s working on your dealership lot and what isn’t. Make it a routine to monitor your used vehicle inventory by conducting a regular analysis to see what’s performing well and what may be helpful to change.
Looking at aspects like pricing, sell times, and how marketing campaigns have performed with certain vehicles can help you understand your best-selling used vehicle models. Ultimately, a solid inventory management system can help you accomplish this.
4. Have the Right Sourcing Strategy
Sourcing is likely always top of mind for dealers, as it should be. Much like the performance of your used vehicles, evaluating your sourcing strategies should become routine. There may always be a more affordable or efficient option for getting the cars you need.
Be sure to prioritize sources that enable you to optimize profitability and quality. If your current sourcing could be more optimal, consider other opportunities, like investing in a professional who can find in-demand vehicles at an affordable price or optimizing your trade-in strategies.
As used vehicles retake center stage, it’s a great time to re-evaluate your sourcing and overall used vehicle strategies. You may find that it’s time to upgrade your inventory management system or that it’s worth it to invest in new sourcing opportunities. Assessing this can help you improve your used vehicle management and increase your bottom line.
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