By Jim Eagan
Auto Dealer Advisor, 2005 Spring

Are those used cars, SUVs, and trucks on your lot cash flow enhancers or cash flow stoppers? Congratulations if they’re enhancers. If they’re stoppers, we have some suggestions to help you unclog the money pipeline.

Because so much of your net worth is in used vehicles, you need to run the department in a professional manner. Turning of that cash is extremely important.

Managing Success

Measurement is key to used vehicle department success. If you can’t measure performance, you can’t manage for success.

To determine the hottest used vehicles in your market, list every vehicle on your lot, and then see how many move in the first 15 days of a 45-day turn versus how many in the last 15 days. You’ll soon discover the hottest used vehicles in your market.

Other areas to measure include:

• How long it’s taking your department to recondition vehicles. It should take no longer than 72 hours.
• How many demonstrations a particular vehicle is involved in the first 15 days of a sales cycle. If the number is high but the car hasn’t sold, find out if your manager is holding out for too much money or if there’s something wrong with the car. If neither is the case, the vehicle may not be right for your lot, and you should wholesale it.
• Are vehicles being rotated? Sixty percent of customers come from drive-bys. You should rotate on a weekly basis. Your ability to have cars in hot spots on your lot is important, so you need to know where vehicles are sitting when they’re sold. Eventually you’ll be able to know to put certain models in certain areas to move them faster.
• What’s the average payment range and average down payment at your dealership? Once you know this, take an inventory of your vehicles, and see if they fit in the ranges.

Since used cars are cash and the longer they’re on your lot the more they depreciate, you need to move them fast. By practicing these tips, your used car department will become more valuable to you.