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Jared Hamilton
From: Jared Hamilton
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Will McGinnis

Will McGinnis National Sales Trainer

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Are You Collecting Your Rent?

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As I was discussing some plans about moving into 2015 with some colleagues, the thought occurred to me that there are varying opinions in our industry about “price” and “turn,” and I wanted to take a simpler step towards the conversation.

Every dealership has a finite number of spaces outside, and unless you are buying the lot next door from WaWa, it’s going to stay that way. The way I see it, the cars you purchase or trade to put in those spaces owe you rent. Whether you floor plan or own the inventory, the car itself is irrelevant. Each one of them is costing you money. The average “holding cost” or Fixed Cost per Vehicle per Day averages out to $28 a day. I’ve found this number in a couple places including an NADA post from 2012 as well as this one by NCM

You may disagree with that exact number… well, that's okay. Let's just get back to the “owing you rent” part.

Example: You have 50 spaces outside and every one of them has a vehicle sitting in it. Each vehicle gets the space without paying you rent along with costing you insurance, floor plan, recon costs, (you already paid your service manager and shop bill, right?) but it’s also holding onto that coveted rent that you and your salespeople are depending on. So if you let it sit for over 30 days and then let it sit some more (45, 60 or even 90 days), you ultimately send the sheriff in to kick it out and likely lose that rent money and then some more by wholesaling it off.  At the very least, you may break even, but did you really “break even?"

Having had the privilege of helping hundreds of dealers, I can personally tell you that a simple shift in your mindset can pay dividends immediately. Hopefully this short post helps you understand that our world doesn’t have to be an emotional rollercoaster when it comes to evicting vehicles that pay little, and in many cases, no rent at all. Each one of those vehicles you put on your lot is an inanimate object - they aren’t squatters by nature and they don’t want to be there any longer than you want them to be.

Now go collect some rent! 

Dennis Wagner
I agree that dealers need to focus more on their aged inventory problem, no doubt, but they don't like hearing it, especially from vendors. Your company (vAuto) cannot possibly be excited by this post. Car dealers as a whole are growing more and more tired of being told how to sell cars by vendors who, in many cases, have never even held an upper level management position (GSM or GM) working at an actual car dealership. The surest way to upset an entire segment of the industry is to tell them how they should manage their used car inventory. It's a very touchy subject. FYI. Good luck!
Larry Schlagheck
I guess you could say the same of most every post from a vendor on DrivingSales, but we welcome the participation on our platform from everyone. Looking back over 2014, some of the most active and engaging posts on DS.com have come from vendors. Yes, we know that dealers can get tired of hearing what they "should be doing" from others but I would put forth that Will has seen more inventory mix ups, mess ups, miscues, successes, wins and conquests than most dealers ever will since he steps foot in many different dealerships on a weekly basis. Not saying he's an expert (and I don't believe he said that either), but getting others in the industry to think about a given topic and perhaps make a change for the better as a result is what DS.com is all about. We appreciate your participation, as well, Dennis as you bring a unique perspective to many topics. Thanks to both of you for being active on DS.com.
Dennis Wagner
That is possibly true, Larry. As any veteran of the industry knows, a dealers used car inventory is like one of their kids. That was my point.
Eric Miltsch
@Dennis - I'm going to take a wild guess here and say that both the community and vAuto are perfectly fine with this post. Will is a respected member of the automotive community who is simply sharing his experience (without even a hint of sales pressure) to help dealers continue to improve their performance - that's the only thing that matters here. Cheers to you Will for the contribution. Keep it up.
Jay Radke
Great post Will, I spent the larger part of my (previous) "Dealer career" driving this number as low as possible for 5 retail locations. Inventory turn is a basic concept most of the industry overlooks. And usually the reason why it is ignored or tolerated at higher levels is: either a) the manager has a fear to admit they made a purchase mistake, b) overvalued a trade-in to make a deal or c) just simply got caught in a market shift. All part of the industry. You don't have to have been a GSM or GM to understand simple math. Larry - I don't buy into "dealers are getting tired of hearing what they should be doing". I know 100's of DPs and GMs that ask for help everyday from guys like Will. It just seems there is more resistance to listening from the 2% of the dealers that are present in the room. Will - I agree 100% with your $28 per day number and have the Manheim/Adesa data to show the wholesale "cost to carry". Be happy to share it with you.

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