Best PracticesDealership Marketing

Three Keys to Managing Your New Car Inventory Through a Pandemic

New Car Inventory Management fundamentally changed during the Spring of 2020 as the global pandemic hit and auto manufacturing stalled for nearly three months. Little did we know at the time that the industry would shift from a “PUSH” to “PULL” inventory system almost overnight.

The move from Push to Pull has been a blessing for New Car Dealers. Consumer demand has been strong since early summer and inventories have remained tight. Both grosses and sell through rates have increased dramatically. Not only that, according to NADA’s Dealer Financial Statement Profile, the floor plan line on the financial statement has flipped from an $85,000 expense in 2019 to a projected $60,000 profit in 2020. The CEO from Group One recently said, “the pandemic is the best thing that ever happened to the new car business.”

With this much tailwind at Dealer’s backs, it’s easy to understand why some Dealers have taken their eye off the ball. vAuto’s inventory data shows that the percentage of aged inventory (+120 days) has not materially changed since COVID19 emerged. Which is to say, most Dealers have not enhanced the oversight of their new vehicle inventory.

Now more than ever, Dealers should manage their new car inventories with increased focus and greater attention on maximizing their monthly allocations.

Here are 3 tell-tale signs you are managing inventory wisely during this global pandemic:

  1. Look Bigger Than You Are Online. Almost every brand has a few models which are in tight supply and hard to get. Smart Dealers have created a “hack” for the OEM systems by listing incoming pipeline units for sale on their website before the actual vehicles arrive on the lot. This allows the Dealer to inflate the size of their online inventory which will attract more shoppers and generate more pre-sold units. Which in turn, accelerates their turn and earn.
  2. Maintain a Low Average Days in Stock.The top 10 percent of vAuto Dealers are currently averaging 40 days or less on lot. For vAuto Lexus Dealers the number is 25 days, which is incredible. The only way a Dealer can maintain days on lot this low is by never letting an aged piece of inventory go unmanaged. All too often, Dealers rely on the “strategy of hope” vs “strategic thinking” when it comes to their oldest units. The painful reality is that those aged units eat up more than just floorplan expense – they also eat up the ability to earn more units in the monthly allocation.
  3. Awareness of Lurking Dead Stock.OEMs are well known for building their fair share of slower moving/low volume combinations also known as Dead Stock. In a study earlier this year, JD Power noted that 78 percent of the model combinations across the industry only generated 25% of the sales. It’s critically important to recognize these slower moving combinations the day they arrive on your lot and immediately deploy an aggressive pricing and promotion formula to move them. Consumer’s don’t gravitate to Dead Stock on their own. Dealers must be proactive to move it.

Today, US Auto manufacturing has resumed to 80-90% of normal production output across most plants. Analysts believe these new lower production volumes will remain the norm in the short term. The challenge of course is the industry is still missing 1,000,000 units due to the three-months plants were idle. It’s going to take a long time to replenish inventory to pre-pandemic levels at 80-90% of normal production especially if we have continued solid retail sales.

In the meantime, The Race for Inventory is in full gear. Dealers who are best at maximizing their allocations will be rewarded with the biggest slice of their OEM’s production. In this current environment where vehicles are being “pulled off the shelf” vs. “pushed onto consumers” – having a full shelf is the best recipe for success.

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The Car Business is more of a hobby than a job for me. I genuinely enjoy thinking about new/better ways to solve the biggest challenges facing new ca...

Jeff Kershner

Founder
May 1, 2005
3,822
1,371
Awards
2
First Name
Jeff
This one speaks to me!

Look Bigger Than You Are Online.
Almost every brand has a few models which are in tight supply and hard to get. Smart Dealers have created a “hack” for the OEM systems by listing incoming pipeline units for sale on their website before the actual vehicles arrive on the lot. This allows the Dealer to inflate the size of their online inventory which will attract more shoppers and generate more pre-sold units. Which in turn, accelerates their turn and earn.


This is a project I was working on several months ago and for whatever reason never completed. It's now back on the map (thanks for the reminder) - not only including our incoming units but also our Service Loaner vehicles, once they hit a particular mileage point.
 
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Reactions: Dan Sayer

ChrisR

Boss
Oct 12, 2015
294
267
First Name
Christian
Incoming units was a HUGE part of our recent success. After the buy/sell, Subaru allocated a ton of extra cars to us, so we had dozens of deposits on incoming rigs. Once the cars got here, made for some nice months.
 

Jeff Kershner

Founder
May 1, 2005
3,822
1,371
Awards
2
First Name
Jeff
Incoming units was a HUGE part of our recent success. After the buy/sell, Subaru allocated a ton of extra cars to us, so we had dozens of deposits on incoming rigs. Once the cars got here, made for some nice months.

That's the success we like hearing about @ChrisR.

I've been working on a process here at my Dealership to accomplish the same while also getting our current Service Loaner vehicles listed for sale while still being in service. Unfortunately Mercedes-Benz doesn't offer feed for importing new inbound units. It's something we need to do manually, initially bypassing the DMS. I keep being told that if we enter into the DMS before the units actually arrive, it will mess up the process and numbers in accounting - I have to call bunk on that (lame excuses) because there has to be a way to get them into the DMS while not affecting their end. If any one has some ideas, I'm listening!

Number # 3 - doesn't really pertain to us since we have the opportunity to build and package out our inventory.
 

ChrisR

Boss
Oct 12, 2015
294
267
First Name
Christian
That's the success we like hearing about @ChrisR.

I've been working on a process here at my Dealership to accomplish the same while also getting our current Service Loaner vehicles listed for sale while still being in service. Unfortunately Mercedes-Benz doesn't offer feed for importing new inbound units. It's something we need to do manually, initially bypassing the DMS. I keep being told that if we enter into the DMS before the units actually arrive, it will mess up the process and numbers in accounting - I have to call bunk on that (lame excuses) because there has to be a way to get them into the DMS while not affecting their end. If any one has some ideas, I'm listening!

Number # 3 - doesn't really pertain to us since we have the opportunity to build and package out our inventory.

Thanks! It was a busy time, with a lot of joy each time we saw a new truck show up.

We are fortunate that we receive an in transit feed from SOA, however, as soon as vehicles populate a VIN, the cars get stocked into the DMS. That throws off my in-stock dates in DMS, however, they are right in Subarunet.

We have our loaners in as loaner status, from the day they populate a VIN, once they are transferred over to used car inventory, then they will appear on the site & I have them reset the in stock date, so my loaners don't enter my inventory at 120+ days old.
 

ggarvin

Lot Lizard
Apr 20, 2009
36
20
First Name
Glen
Any thoughts on photos of in-transit or ordered vehicles? We have some dealers who are applying cloned images to incoming units. We will do whatever the dealer wishes although I typically advise them to put an "in-transit" stamp on the image or in the listing for at least some disclosure but I'm curious to others thoughts on this.
 

ChrisR

Boss
Oct 12, 2015
294
267
First Name
Christian
Any thoughts on photos of in-transit or ordered vehicles? We have some dealers who are applying cloned images to incoming units. We will do whatever the dealer wishes although I typically advise them to put an "in-transit" stamp on the image or in the listing for at least some disclosure but I'm curious to others thoughts on this.

When I have been able to get a solid set of photos of each trim/color option, I have had a "library" that I dove into, to upload for in transit vehicles (and even new, in general), with a disclaimer that they are of a similar vehicle, please verify exact equipment, yadda yadda yadda
 
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Reactions: ggarvin

Jeff Kershner

Founder
May 1, 2005
3,822
1,371
Awards
2
First Name
Jeff
Any thoughts on photos of in-transit or ordered vehicles? We have some dealers who are applying cloned images to incoming units. We will do whatever the dealer wishes although I typically advise them to put an "in-transit" stamp on the image or in the listing for at least some disclosure but I'm curious to others thoughts on this.

At the very least, I would post an "In Transit" image. Even better, do what @ChrisR is doing - stockpile a few photos with an "In Transit" overlay w/ some additional verbiage / call to action(s) to entice a bit of urgency.
 
  • 2
Reactions: ChrisR and ggarvin