From the February issue of UCD
By Brent Carmichael
Inventory is a hot topic in the BHPH world. Dealers need to know not only where, but what and how to find it.
In my experience, the most successful BHPH dealers focus on the basics. They are firm believers in the K.I.S.S. philosophy – keep it simple stupid. No need to overthink and over-complicate things. Here are five areas to continually work for inventory.
1 Repeat business is the first basic for inventory acquisition. Best-selling dealers average between 25 and 33 percent of their monthly sales from repeat customers. These patrons will be either low-balance customers trading into a new vehicle or previously paid-out customers returning to make another purchase. That means, a third of the dealers’ needed inventory is satisfied with vehicles they have a history with. Historical records are valuable when it comes to repairs and price.
2 Recycling repossessions is the second basic to focus on. Typically, dealers have historical data and time to completely inspect repossessed vehicles and determine reconditioning needs. Some dealers are placing up to 60 percent of their monthly repossessions back on the lot. The negative to recycled vehicles is higher reconditioning costs, however, it’s more cost-effective than purchasing at auction.
3 Auctions are the next basic not to overlook. There are fewer vehicles going down the lane these days, but auctions are still an effective inventory source. The positive to low auction volumes is that the auction houses are more competitive with one another for dealer business. There is no better time to expand your horizons and check out as many auctions as travel and expense will allow.
When shopping for new auctions, do not limit yourself to just the large national chains. Independent auctions are becoming very aggressive in attracting dealer business.
Most auctions, national and independent, are posting their vehicles for sale and post-sale information on familiar platforms. Dealers are able to purchase inventory from the comfort of their office and research what auctions have available.
4 Dealer trades are another basic in inventory acquisition. Personal contact with trading dealers is key, even when new car sales are down. Too many buyers only call dealers to ask about vehicles, instead of taking the time to actually visit with them. Building strong relationships with business owners may give you the edge over other buyers.
5 Private sellers are also a source of inventory. eBay, Craigslist, newspapers and auto magazines can be valuable tools in your vehicle hunt. Although some dealers may feel this avenue is not worth their time and effort, remember in today’s economic challenges, there are sellers who simply need the money to get by and are reasonable in their expectations.
From a financial standpoint, acquiring inventory comes down to two very simple questions: How much do you have in the bank account? And, how much of that are you willing to spend? There is enough inventory available if you are willing to pay for it. Values are a little out-of-control right now but have leveled in recent months.
Finding the right inventory for the right price is still possible. The key will be not to overthink and over-complicate it. If you focus on the basics, you will be working smarter and not harder.
