How to avoid old age inventory?

Robert DiPalma
When I started in the auto business in 2000, I worked for a busy Nissan store that had 100-120 used cars on the lot at all times and we sold about 70-80 used cars per month. I was at this store for almost two years, and in that time we had only 2 cars (that's right 2) hit 6 months or more! How they accomplished this was aggressively writing down their aged units as well as paying at least $300 minimum flat on these vehicles. Sometimes these 90 day plus vehicles would have 50/50 comissions or flats of up to $500. As you can imagine, us salespeople would certainly target these vehicles when doing inventory walks!
James Jalali
Hi Robert, Thank you for your input, I was more looking into avoiding old age inventory. What you have provided is the solution for old age inventory. We have been having old age inventory problem since I remember. We are small independent dealer with average of 60-70 vehicles, our monthly sale is 30-35. I do part of purchasing as well and I do pricing all by myself. My experience tells me that having old stock is the result of followings: 1. Not being selective on purchasing, base on dealer particular market and competition. We have changed our type of inventory since 5 years ago which brought us different type of customers, base on their qualification. We have more solid deals, (prime). 2. Not paying attention to your competition pricing. I do the pricing and know how long a vehicle stays in our inventory when I price them. I have been in habit of changing the price of a vehicle when it doesn't bring any traffic to my site, by checking a vehicle's performance on third party sites like Autotrader.com, Cars.com and more than any, our own website. So if a vehicle doesn't perform right, there is something wrong, either not a demanding item, or over priced comparing to competition. 3. Not letting go When a vehicle doesn't sell or generate any traffic, you shouldn't wait on it for long time, you should work on the price within 30 days, no matter what is your cost. Just think about this, you have one third of your inventory sitting in your lot for over 90 days, your investment on those unit all together is about $200,000. sitting there not doing anything for you creating cash flow problem and basically a bottleneck in the whole retail process. Those unit has to be replaced by fresh inventory, which generate excitement among your crew and generate traffic. I know that many dealers have a 40 days rule, but I would watch my inventory's performance from day one and in two weeks period I would know if a particular vehicle is destined to become old stock.

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