How much does it cost to NOT sell a car?
Chapter 1 — Inventory is a Waste
A car dealership not managing its inventory for the fastest T2L speed to sale is wasting that investment.
How much does it cost not to sell a car?
When fixed and variable operations can’t agree about where internal work fits into the dealership’s priorities — or when there’s delay in recommending and authorizing repairs — used car profitability will take the hit!
Where there is no accountability to reconditioning and sales efficiency, only one outcome is inevitable: Cars can’t be sold.
Where T2L speed to sale isn’t priority, aged cars drip and dribble out of recon. And, if this unnecessary aging isn’t damaging enough to the bottom line, cars taking too many days to move through recon accumulate so much holding-cost depreciation that their gross is near zero when they finally do retail.
There’s an answer to this, however. Those who manage by T2L speed to sale have mastered these fundamentals:
- Average Days in Retail (ADR) — This is affected by everyone who “touches” the vehicle — from recon system login through final photos. ADR measures the reconditioning steps the department can control.
- Time to Line (T2L) — This is the measure of efficiency from vehicle acquisition through ADR to sale-ready status.
- Speed to sale — This discipline — this mindset — focuses on eliminating delays, miscommunication and other bottlenecks that impede how fast you can retail a car. Speed to sale isn’t one department’s or individual’s responsibility, but that of everyone who
Seen visually, time to line describes a workflow of processes necessary to get used cars ready for resale, from acquisition to the front line. ADR is a narrower timeline, focusing on just what recon can control. Embracing a speed-to-sale culture improves the outcome of both ADR and T2L.
Jared Ricart, president of Ricart Automotive and one of America’s highest-volume used car retailers, describes used cars as “melting blocks of ice.” If you hope to generate profit for replacement inventory and boost inventory turn, you’ve got to sell them quickly.
Inventory is a waste if not managed for maximum speed to sale.
So, to repeat: How much does it cost not to sell a car?
The answer is, it costs too much — in holding cost, aged inventory, eroded margin, fewer turns and lost sales.
This tip is from Dennis McGinn latest book Inventory is a Waste. Request a free copy of the book below!
