By Jasen Rice, Founder/CEO Lotpop
You’re in the time business, which I’d guess you know all too well.
You know that time passes all too quickly – and often is allowed to slip by without your wringing a satisfactory return from its potential. You see that all too clearly later through the rear view mirror.
Selling profitably is always about time – and timing. Each of us has 30 days, plus or minus, on the calendar every month, but don’t you believe it; time flies!
Watch inventory aging like a hawk, responding proactively and quickly to move inventory at increasingly earlier aging dates if you hope to make a profit on your investments these days.
A Good March
You probably came off a good March – better than expected. According to MarketWatch, March auto sales were “surprisingly strong.” Citing Autodata information, MarketWatch said March SAAR sales were 17.45 million units, up from 16.57 the prior month.
When you come off a good month, the temptation can be to relax a little, but that is not helpful. High-five the gang, but get everyone back into the trenches. Your adversary, time, is already suited up and coming after you.
Keep an eye on interest rates. Edmunds reported in a late March report, Used Vehicle Market Poised for Record Sales in 2019, new-car interest rates jumped last year by 17 percent with used car rates increasing by 9 percent in the same period.
The report said market conditions have never been more favorable for CPO vehicles, which is good news. Take time to educate consumers about their value. “Many shoppers are unaware of the benefits of CPO vehicle programs, but given the tough financial conditions in the new market, it's never been a better time to look into them," said Ivan Drury, Edmunds' senior manager of industry analysis, in the Edmunds report.
Make it a Better April
Spring fever is hitting now, and consumers have more than a few distractions to keep from spending a warm, sunny afternoon at the car dealership. If you stocked up in used cars in March for a hopeful continuation of that success from your March Madness, you might be disappointed.
If you’re not grinding every day as if it’s already end of the month and moving cars off the lot within 31 days of their acquisition you’re already in trouble. Cars no longer age out as they once did. Oh, they age all right - right under your nose. Sixty days to make a little margin isn’t the risk anymore - it’s 31-to-45 days, and narrowing.
When cars age out faster than they once did, it influences your business in ways you’d do well to heed:
Dale Pollak, writing recently in his blog Like I See It, discussed this topic. “Consider how quickly used vehicles run out of margin today compared to two years ago,” he wrote. “In 2017, used cars hit a 90 percent cost-to-market ratio around day 60. You could sell those vehicles then, and still make some money even it wasn’t all you wanted. This year, we’re seeing vehicles consistently hit the 90 percent cost-to-market ratio around day 30!”
That’s what I’m talking about here, so again, the message is: grind every day as if it’s month end if you want to sell cars and make money in this market. You can be sure that this routine will require even more out of you going forward. Here are a few ideas to help manage this risk
Don’t wait until inventory approaches day 29 or 59 to look at the data – do it early and do it often. Take action if nothing is happening on your cars. Watch inventory creep, which occurs when the sale rate of your 31- to 45-day bucket has pulled back. Should you adjust pricing to attract eyeballs or get the phone to ring? Consider the color of the cars on your lot – what do the numbers say about that make, model and mileage in the color(s) of those you inventory. Is the color of the vehicle in demand or an oddball that you’ll need to drop the price on to move or spiff to sell it?
Focus your people, remarketing, marketing and energy on selling cars before 31 days.
To wrap up, if you don’t know, learn what it takes to: