BLOG: How managing your stock turn can improve profitability
Having the correct level and mix of stock is imperative for any motor dealer in Ireland, franchised or independent.
Ask any good retailer in any sector and they will all tell you that efficient stock control is paramount to profit and success!
The motor industry is no different and used car stock control is one area of the business that is vital to success, but overlooked by many.
When I ask dealers on why cars over 90 days in stock are still on the forecourt, the majority respond by claiming they are “going to retail out of it” however, if a car hasn’t sold within a reasonable period – say 90 days – it’s probably the wrong stock for the business or bought at the wrong price.
Careful stock control is one of the most important, yet most ignored aspects of a used car business. Ignoring stock turn means your profits could drain away and as time goes on; your costs go up whilst your profits go down.
An efficient way to manage your used car stock is to apply a very simple stock turn formula, for example if you have sold 450 used cars in a year, and you have 56 cars in stock, the calculation would be 450/56=8, 8 times stock turn should be the absolute minimum. Anything less than this will mean you are carrying your stock for too long, which will end up costing you money in the long run.
NextGear Capital Stocking Plans have been created for independent and franchised vehicle dealers, to provide a simple and cost effective way for you buy and manage your stock. Why should a dealer use their own funds to carry used stock, when they could utilise that money elsewhere in the business, like marketing, capital investment or release of equity?
By using our Stocking Plans a dealer can have the flexibility of using our money to stock vehicles, keep their business liquid, and use our technology to help manage the sales cycle of their stock. Sales managers can utilize our technology to see what stock needs to be turned before it becomes too expensive to stock, so keeping the overall costs down for the business, which will ultimately lead to increased profits.
By managing your stock in real-time, and knowing what stock is costing the business more money, you can be much better informed on how to run the business, and can help you choose what vehicles to stock when buying from auctions, wholesalers or the trade. Very few dealerships have failed due to new car funding issues, but failing to manage your used car stocks can have detrimental effects on a motor dealer.
“The definition of madness is doing the same thing over and over and expecting a different result”
Thanks for reading!
Regional Sales Manager