Summer Season Used Vehicle Inventory Liquidation to Fall Season Domination
Tick-Tock runs the clock. The fall retail season is here.
With each passing day, our Used Vehicle inventory acquired this summer slides into a position of risk. Yet, for those of us who plan ahead and famine our inventory, a feast of opportunity awaits. Pull up a chair at the table!
Many of us had a very robust retail sales summer season, including, of course, volumes of trade-ins. Upon closer inspection, we must ask a few questions. Did we stretch to make that next deal? Were we chasing an OE tier? Was our CTM (Cost to Market) accurate?
The day of mass liquidation is coming r our used vehicle inventory, but with an optimistic mindset, gold can be mined within.
Beginning in the second week of October, many large inventory sellers (lease turn backs, rental fleet operators and large dealer groups) will begin to flood the auctions and liquidate the inventories they acquired this past summer. This liquidation will depreciate our held inventory with lightning speed. Left unaccounted, our residual values can drop $500-$1,000 or greater in a matter of days.
Our unique opportunity calls us to act immediately in early October. Specifically, deep-dive your current PTM (Price to Market) vs. now-revised CTM and clear your inventory. Your first loss is your best loss in any scenario where you may have stretched on your vehicle value at the time of the trade.
At first glance, this may be a “whoa, hold on” number, when applied across used vehicle inventory. However, in a week, it may prove to be a far greater sentiment.
Think of it this way…
If we have an XYZ unit which we valued at $22,500, which is now worth $21,500, it will be worth $20,000 by the end of October.
OPPORTUNITY: Clear your used vehicle inventory, price it at the Market Value of $21,500:
- Scenario 1: You sell to a cash buyer with no trade-in vehicle and record a loss. (But the vehicle is out and your capital is now available to acquire fresh inventory, etc.)
- Scenario 2: You sell to a cash buyer with a trade-in, work to value at 80 to 83% CTM and our service department will secure recon gross. (The vehicle is out and your capital is now available to acquire fresh inventory, etc.)
- Scenario 3: You sell to a finance buyer with a trade-in, work to value at 80 to 83% CTM, secure F&I and our service department will secure recon gross. (And yes, the vehicle is out, your capital is now available to acquire fresh inventory, etc.)
In all scenarios, you have cleaned your inventory and recycled your purchase capital to acquire fresh inventory at reduced costs (a win in every detail).
Now, consider the same XYZ model you just sold. You can turn to the open market (auctions) and secure the same model for +/-10% less than the value you previously owned your inventory for.
The successful formula will require courage and discipline. However, if you famine and starve your inventory for 15 days in October, your efforts will ensure your inventory is refreshed at below market values.
ADVANTAGE: When your used vehicle inventory for the XYZ (recycled) model is now at $20,000, you’ve reset your days in inventory and have provided another unit for recon to your service department. Your in-market competing dealers will be left with summer-season inventory, devalued to well below their CTM.
Now you have superior inventory cost and greater ability to stimulate your market, attract new buyers, secure additional trade-in inventory, and provide opportunities for F&I and fixed operations.
Our time is now. These next few weeks will be very strategic, very exciting, and will ensure we have a very successful Q4.