Many questions continually pop up around dealerships nationwide: Should we keep this vehicle or send it to auction? Is this vehicle worth reconditioning for the lot? How far out should your used car department start planning for seasonal demand?
Thankfully the semiconductor shortage is – mostly – over for the industry, according to S&P Global Mobility. While most OEMs have bounced back in terms of manufacturing, pressure on the supply chain remains with risk of further disruption.
This complex and evolving market requires dealers to take a proactive and data-driven approach to inventory management.
In this blog post, we share three best practices for dealership inventory management including:
- Making inventory decisions driven by dealership data
- Maximizing the profitability of your existing pre-owned inventory
- Building homegrown inventory through proactive vehicle acquisition
Make Data-Driven Inventory Decisions
In today’s rapidly changing automotive market, dealers have a potent tool: Data. Locked away in every dealership’s DMS and CRM is a wealth of customer data critical to building and maintaining a profitable used car inventory – especially when acquiring vehicles through trade.
Ensure your sales leaders are not only staying in the know regarding changing consumer demands and preferences, but they’re also regularly analyzing your dealership’s customer data to identify localized trends and market demand. This includes identifying makes and models that have sold consistently well over the last 30-90 days – and which vehicles have sat on your lot the longest.
Proactive dealerships nationwide have taken this one step further by leveraging behavior prediction technology that integrates their CRM, DMS and inventory data. The reports generated by these advanced marketing tools, coupled with OEM updates related to their incoming inventory, empower dealers to automatically make data-driven decisions when it comes to their dealership’s inventory based on the wants and needs of their audience in real time.
Maximize Your Current Pre-Owned Vehicle Inventory
Heading into Q4 of 2023, the continued impact of inventory shortages has made the wholesale pre-owned market even more competitive. As a result, dealers have, for some time now, been more selective about sending vehicles to auction, choosing instead to keep and recondition certain older models on their lots.
This dealership inventory strategy proves invaluable with the sustained consumer interest in pre-owned vehicles and the cost benefits of direct retail over auction. Dealers who can adeptly discern which trades offer the best reconditioning and retail potential stand to benefit the most.
Of course, there are plenty of factors to consider when weighing which vehicles to keep, spanning from a vehicle’s maintenance and accident history to changing consumer buying behaviors. Forward-thinking dealers are leveraging a similar approach to the previously mentioned data-driven inventory strategy to predict reconditioning costs and market demand more accurately, helping maximize the profitability of their pre-owned inventory.
Not only does behavior prediction technology allow dealers to identify and engage owners of in-demand makes, models and trim packages, this approach also empowers dealers to think ahead and proactively map prospective buyers to their available and incoming inventory – minimizing the number of days vehicles sit on the lot and maximizing their inventory profitability.
Create and Maintain a Strong Homegrown Inventory of Pre-Owned Vehicles
Maximizing your current inventory and using robust data and advanced marketing tools to make decisions are two important elements for dealerships building a strong homegrown inventory. Representing the pinnacle of profitability, vehicles in a dealership’s homegrown inventory were once sold as a new vehicle sale, returned to the original dealership for service and eventually traded back in to be reconditioned and sold again as a pre-owned vehicle.
Committing energy and resources to the development of a strong homegrown inventory strategy equates to added revenue and profitability to each department in your dealership long after the original new vehicle sale – all while building loyalty and defending against customer defection through ongoing communication.
Dealership tools powered by behavior prediction technology like Mastermind maximize profitability at every step by largely automating this process from the first new vehicle sale to identifying and engaging the best pre-owned prospect for that vehicle later down the line. In fact, dealer partners who utilize Mastermind report an average cost-per-sale of $115, significantly lower than the industry average of $624.
Navigating Inventory Challenges in the Modern Dealership Landscape
In the ever-evolving landscape of modern dealerships, adopting a proactive approach is critical.
While dealers around the U.S. have continually faced evolving inventory challenges in recent years, overall consumer demand still remains strong. Instead of waiting and hoping for a quick industry recovery, opportunity awaits dealers who take control of their future success with a data-driven management strategy.
By leveraging intelligent automated sales and marketing technology like Mastermind, dealers are able better inform their inventory management strategy, enabling them to streamline processes, optimize their approach and maximize the profitability of their pre-owned inventory.
Want to learn more about how Mastermind can help you maximize your dealership’s available inventory? Contact us for a free demo.