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Understand Seasonal Sales Data to Guide Your Used-Vehicle Inventory
Every dealer knows that managing the inventory of used vehicles is tricky business, and many are making considerable strides in proactively understanding and controlling what moves in and out of their lots. But while dealers are getting savvier about their inventory control guidelines, sales and promotions tactics, and use of software tools to keep the right mix of vehicles in stock and rolling out their doors, I often see them overlook one critical consideration: the four seasons.
Important factors like vehicle replacement costs, availability, and retail pricing fluctuate throughout the year, and understanding their peaks and valleys can work to a dealer’s advantage.
As a dealer, it may seem obvious that you’ll want to parade out a fleet of bright-colored convertibles when the sun comes out in spring and rim your lot with beefy-tired trucks and SUVs as winter approaches, but you also know it’s easier said than done. Here are a few tips to help you grasp and leverage the seasonal ups and downs that affect your inventory:
- Looking back on your dealership’s historical data is smart, but try shifting your retrospective analysis of sales and inventory from monthly data sets to seasonal. Break out the figures by winter, spring, summer, and fall, and don’t just use the number of used vehicles you typically sell each season to predict your inventory needs, but also analyze the types of vehicles you sold. For example, let’s say you historically sell 90 cars each month during the summer but see a dip in sales to 60 or fewer after the fall and winter holidays. If you keep a 45-day supply of used vehicles in inventory as a rule, in this scenario you would downsize your winter inventory target from 135 to 90. That lowers your winter rolling inventory target by 45 vehicles. What makes, models, and years would you eliminate from that stock? The types of vehicles you historically didn’t sell in those winter months — likely sporty models and convertibles.
- Your historical data will give you even more “intel” on your ideal seasonal inventory if you segment the vehicle information a few more ways: by model type (SUV, truck, small sedan, convertible, etc.), cost, color, and trim level. And defining your dealership’s core products can help you make some of those tough decisions about what to put on the lot and what to turn away. A General Motors (GM) store in the northeast, for instance, might stock 50 percent of its inventory with SUVs and trucks in the summertime, jumping to as much as 75 percent in the fall. For the remainder of the inventory, it would be wise to keep least half as core GM products, like the Malibu, Impala, Equinox, Tahoe, and Silverado. Many of these late-model core vehicles can be certified as well.
- Sort your history of total annual sales by vehicle type and see how the value of these cars changes over the year. Plan on stocking the most inventory of each particular vehicle during the season its price point peaks. Make sure your appraisers and sales managers understand those trends and negotiate pricing and trade-in values accordingly.
- A used-car inventory that comes mostly from trade-ins will leave you at the mercy of whatever your customers bring you, so you’ll need to take deliberate control of the remainder of your stock. When you have a more solid understanding of what vehicles are most valuable at different times of the year, seek them out at auction. When a specific type of unit is needed in your inventory, don’t be too conservative in your appraisal process. Remember, at the auction you are paying buyer fees and transportation — and getting someone else’s problem.
- In general, slim down your overall inventory for early winter and fatten it back up in February and March. Most people aren’t shopping for cars from mid-October through the end of December, but sales tend to spike at the start of each year.
Not every climate experiences the four seasons in the same way, but whether your dealership is in North Dakota or Florida, you can capitalize on seasonal trends when you analyze and understand them. These tips should give you a good start in pinning down the information you need to maximize sales along seasonal lines.
How we can help
CLA’s dealership consultants know how to organize, sort, and interpret inventory data so you can plan for the types of used vehicles you should keep on your lot each season.