The adjustments car dealers need to make to improve profitability

Welcome to this week’s episode of Used Cars Weekly, the original CBT News show dedicated to bringing car dealers best practices and tips for the used car department, in-depth dealer interviews, hands-on dealership strategies, as well as vendor analysis. Today, host Jasen Rice, founder of Lotpop, discusses current market trends and what you can do right now on your lot to start making adjustments.

Dealers are starting to feel a slow down of used cars. Rice says the hard part is if you’re waiting to feel it, you’re probably 30 to 45 days behind. Dealers were making adjustments in September to prepare for a slower October. The traditional fall slump is happening right now.

High mileage and late model vehicles are feeling the worst of it. One of the reasons why is because values are high for consumers. They aren’t willing to pay top dollar for older used cars. If they have to pay more, they want something more dependable with lower miles. Also, new car buyers won’t transition to a high mileage car. If you’re finding that as a pattern on your car lot, start making adjustments now.

Another pattern is used trucks are starting to see a slowdown. Usually, around the end of summer, truck sales usually slump. Rice believes you get a strong Spring, at the beginning of Summer truck season, as businesses pick up and they need more trucks. The older and high mileage trucks are sticking the most.

Rice says to focus on figuring out the ‘cap’ of your floor. Next focus on the middle bucket, which is anything 31 to 60 days old. Increase the first 30 days sale rate. Rice says to try and get as much fresh inventory out, to offset any age cars that may be costing you gross profits. You also want to increase the odds of the car selling.

For the middle bucket, you don’t want to maintain more than 25% of your current inventory in that bucket. The reason is the need to eliminate the bleed through to the older buckets. 30% of your overall sales could be coming from that bucket. The more cars in the middle bucket, the less you’re making overall.

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