Of the 5 million vehicles for sale in the U.S. at any given time, 41% are aged over 60 days. That’s over 2 million vehicles currently sitting on dealers’ lots, aging out.
If you believe that the holding cost per vehicle is ~$30 per day (combined depreciation and cost of funds), we’re talking about hundreds of thousands of additional costs per dealership per year, and billions of dollars of foregone profit opportunity for dealers across the entire industry.
At a high level, I suggest that one of two things happened to cause this huge cohort of aged, undesirable units. These dealers either paid too much at time of vehicle acquisition, or bought the wrong car to begin with: the wrong trim, options, color, interior or miles.
What can the industry do?
What can be done to help resolve this huge industry-wide problem? Can we prevent this aging problem for dealers from ever happening?
First, we need to harness consumer demand to understand which cars are the most strongly desired in any particular geography.
Next, we need to contrast this demand to both recent vehicle sales as well as a snapshot of all current supply in the local market, providing dealers with full visibility into supply and demand — before they acquire the vehicle.
Finally, dealers need better information than simply relying on guidebooks for pricing intelligence. By harnessing recent sales data and current market pricing, the industry will be much better positioned to know exactly what they can pay, prior to vehicle acquisition.
The top 10% of dealers seem to have figured this out. Whereas the industry average is 41% of cars over 60 days aging, top-performing dealers average less than 10% of their inventory aged over 60 days, and turn their inventory much faster (exceeding 12-times per year, vs. 6-times per year for the average dealer).
What are top-performing dealers doing that others aren’t?
In some cases, these dealers have better (smarter/more experienced) personnel. In some cases they have better adherence to strict policies and procedures. Most have a relentless focus on process improvement.
But, the industry has fallen down by not helping the average rank and file dealer improve their performance. The industry needs to more aggressively evolve new data and technology solutions to aid dealers as they make inventory and pricing decisions — to raise the performance bar for all dealers.
There’s room for improvement for all of us.
Towards a solution…
With the widespread talk of “artificial intelligence”, we should be asking why dealers don’t have “always on” software that constantly works in the background 24/7 to enhance dealership employee intelligence and decision-making skill, and to warn them anytime that they’re about to make a mistake.
What if each dealer employee had a guardian angel on their shoulder that constant chirped in their ear anytime they were going to make an inventory or pricing decision?
What if this software worked tirelessly 24/7 to help protect dealership employees from ever making a bad decision again?
What if these insights interoperated with all of a dealer’s existing systems?
Dealers need a new way to conduct business that leverages all available market data to prevent them from making inventory and pricing mistakes. The time has come to unlock the potential of advanced data science with practical and approachable tools to help dealerships and their employees.
I look forward to unveiling our new game-changing technology at the DrivingSales Executive Summit in Las Vegas next week
VINFactor translates mission-critical vehicle data into quick usable insights.
We conducted 400 dealer interviews over the last nine months. We found the same objections shop over and over again (“what is what is wrong, what should I do, how should I do it?”).
Dealers complain that they have too much data, too much information, too many tools — but have no way of distilling all of this down into actionable insights that will “move the needle” on their business.
VINFactor improves inventory turn, increases profit per unit sold and drives increased gross profit for dealers.
Get VINFactor for free for a limited time: www.VINFactor.com.