It’s sometimes startling to see the disparity in the ways dealers manage their new and used vehicle inventories.

As a dealer recently put it, “I have $1.4 million in used vehicle inventory, and we pay attention to it every day. We track VDPs (vehicle detail pages), our price position and our merchandising. But I have $13 million in new vehicle inventory that I don’t look at much at all.”

2017 Ford Ranger Concept 300x214 3 Ways to Maximize Your New Car Sales With Improved New Vehicle ManagementThe dealer’s approach to new vehicle inventory management is fairly common—particularly in times when sales are strong. Traditionally, dealers don’t believe that new vehicles depreciate, and factory floor plan assistance can help ease the cost of carrying older-age units.

But here’s the question: How much better off would dealers be doing, in terms of new car sales and profitability, if they took a more proactive approach to managing their new vehicle inventories to sell more vehicles in less time?

To answer the question, let’s consider the following new car inventory data points:

  • According to the National Automobile Dealers Association (NADA), the average dealer sells 87.5 new vehicles a month. AutoData reports the average days supply of dealers’ new car inventories runs near 70 days, which translates to roughly 200 units on the ground.
  • Industry data also shows that nearly half (48 percent, or 96 units) of the average dealer’s new vehicle inventory is older than 90 days.
  • NADA also reports the average dealer earned $143 in floor plan assistance per retail unit last year, or about $151,000.

To me, the most troubling data point above is the number of aged units. It suggests that dealers do a decent job retailing vehicles their customers want, and a less-than-acceptable job with less-desirable cars. Further, the aged units also underscore the cost of new vehicle inventory inattention—fewer sales, less gross profit, and less benefit from factory floor plan assistance and other below-the-line programs.

Dealers should tackle the aged new cars head-on, aiming to reduce the percentage of aged units by 10 percent, if not more. For many dealers, this operational goal will require more astute, buyer- and market-minded management of their new vehicle inventories and pricing.

Here are three best practices to help you get there:

  1. Know each vehicle’s market “sweet spot.” A growing number of dealers are using technology and tools to fully understand how many in-/off-brand vehicles compete with their new cars, the prevailing asking prices in the market and buyer interest in their vehicles. Dealers who proactively apply these competitive insights to their new vehicle inventory and pricing decisions often find opportunities to ask for more gross, and to know the specific units they should price aggressively to increase turns and optimize their inventory mix.
  2. Price with greater transparency. Today’s buyers prefer to see new vehicles listed online with transaction-like prices that include all relevant incentives. They view listings with “call for price” or “Get Your Internet” price as signs of the traditional car-buying shell game. By contrast, dealers who adopt transparency-focused pricing strategies typically benefit from increased buyer interest, more showroom traffic and more profitable sales.
  3. Avoid the “lazy” mistakes. Dealers who adopt more proactive, market-focused new vehicle inventory management practices quickly identify two trouble spots. First, they discover that they often trade some of their best cars to other dealers. Second, they find a pattern of selling their freshest vehicles first, even though they’ve had the same car in stock for weeks or months. “I didn’t realize we had a problem,” says a Midwest Ford dealer. “We were simply trading or selling the cars closest to the showroom. These were stupid, lazy mistakes that cost me money every month.”

I would encourage dealers to adopt and follow these best practices as soon as possible. The outlook for new vehicles is decidedly less rosy than it was a year ago. Analysts are calling for sales to plateau, if not drop off.

When this market shift occurs, the true costs of a dealer’s inattention to new vehicle inventory management will become painfully evident—which is all the more reason to start paying attention today.




{ 1 comment }

I’m both a little amazed and humbled by the success of Stockwave, a tool that helps dealers efficiently source wholesale vehicles.

In less than 30 days after the product’s official launch at the National Automobile Dealers Association (NADA) convention last month, more than 1,000 franchise and independent dealers have signed up for Stockwave.

Frankly, I’m blown away by the positive response. It suggests that Stockwave’s benefits are right for dealers, and the product arrived at a time when dealers are hungry to find ways to spend less energy and time finding the auction vehicles they need and buying them on the money.

But I’m also reminded of how long it took to reach the 1,000 dealer customer mark with vAuto.

By my calculations, four years passed between the time I pitched vAuto to the first dealer (and promptly got asked to leave) and we had 1,000 dealer clients. That’s 1,460 days, nearly 50 times longer than it took Stockwave to reach the same milestone.

Why the difference? Two reasons come immediately to mind.

First, dealers are far more receptive to Stockwave than they were to vAuto in the early days. Looking back, vAuto hit the market a little before its time, and my family can attest to the emotional and financial pain of a father pursuing a vision others simply didn’t yet see.

Second, and most important, Stockwave represents a level of collaboration and commitment vAuto never had. When vAuto started, it was just my co-founder Mike Chiovari and me sitting at my kitchen table, hatching a new software idea.

By contrast, Stockwave represents the best and brightest at Cox Automotive. Its development and launch resulted from a high level of collaboration and cooperation from all corners of the company—marketing, product development/research, sales and support.

Given this backdrop, one might think Stockwave was destined to be a winner.

But I take a different view.

In any large company, there are entrenched and vested interests that, by their nature, tend to stifle innovation. In any other organization of Cox Automotive’s size, Stockwave might well have died in the woodshed.

Thankfully, Cox Automotive’s leadership team understands this risk, and actively cultivates a culture/work environment that prevents such resistance from taking root.

That’s the reason I continue to work for Cox Automotive, and Stockwave continues to shine.



I had the privilege of hearing Roger Penske, head of Penske Automotive Group, share his perspective on the car business today during a Q&A session with Cox Automotive president Sandy Schwartz.

The session is part of a Cox leadership team meeting this week in Fort Lauderdale, where we’re gathered to sharpen our knowledge and understanding of the challenges and opportunities facing dealers.

Now, in the interest of full disclosure, I should note that I hold a great deal of admiration and respect for Penske and his organization.

I’ve visited thousands of dealerships across the country over the years and, simply put, you can always tell when you’re in a Penske store. The facilities are consistently pristine, and every team member contributes to an unmistakable air of process, productivity and purpose in the dealerships. Based on these experiences, I’ve never been surprised as the Penske organization continues to build on its long track record of success and reputation as a top-performing dealer group.

In the Q&A session, Penske covered a lot of ground, but there were four key take-aways that struck me as instructive and relevant for every dealer:

  • The power of people. It’s clear to me that Penske and his organization put their people first. They place a high priority on recruiting, hiring and training people who fit well in their organization. They expect accountability, and they reward good performance with the additional opportunities and responsibilities good employees expect. As Penske shared his perspective, I couldn’t help but think that behind every great team, there’s a leader who views employees as assets, and champions the cause of proper human capital management.
  • Facility cost friction. Penske shared how his group has invested more than $2 billion in facility renovations and upgrades in the past few years. Penske wasn’t complaining; he astutely views the investments as part of a franchise dealer’s responsibility to maintain mutually beneficial relationships with factory partners. But Penske also noted the car business’ ever-accelerating shift toward digitally driven retailing. He openly wondered whether a dealer might be equally, if not more, successful in the future with just an “internet connection and a warehouse.” Ultimately, Penske’s observation points to what I’d call a growing gap between factory expectations for physical facilities, and the front-line realities dealers face with e-minded customers.
  • A customer trifecta. I liked how Penske framed today’s new/used vehicle buyers. You’ve got older customers, who buy at expected intervals and call “Charlie” when it’s time to make a vehicle purchase. There’s a second “hybrid”-like customer, who goes online and comes to the dealership armed with as much, if not more, information than sales associates. Millennials make up the third group, and their expectations require dealers to develop a meaningful and relevant presence in social media. Penske captured the key challenge and opportunity for dealers—how to serve each of these customer groups effectively, efficiently and equally well.
  • A “buffer” in tougher times. Penske touched on the cyclical nature of retail sales, noting that dealers will inevitably face tougher times ahead. His plan: Continue to build on the 42 percent of dealership gross profits that come from his service and parts departments. This emphasis on fixed operations performance and profitability creates a “buffer” that helps dealers weather more turbulent times in new and used vehicle sales. Penske’s correct, of course, and his point got me thinking: I wonder how many dealers will someday wish that they’d done a better job building their own “buffer” today, when times were good?

As Penske finished the session, I felt grateful for the opportunity to learn from one of the best in our business.


3 Essential Steps To Maximize Gross Profits On Auction Cars


If you ask dealers for their top complaint about the used car business, many will say it’s difficult, if not impossible, to acquire wholesale vehicles “on the money.” Dig a little deeper, and the root of the complaint becomes clear—dealers believe they can’t make the gross profit they would like to see in their used [...]

6 comments Read more from Dale →

An Independent Perspective On The Used Car Business


TJ Riley isn’t your typical independent car dealer. For one thing, he’s a lot more disciplined than many franchise and independent dealers when it comes to buying vehicles at auctions. “If you walk out to the Dallas Auto Auction on a Wednesday, it’s just eye-opening the amount of dollars changing hands, based solely on the [...]

0 comments Read more from Dale →

vAuto’s Mandi Fang Earns An Automotive Honor


I love it when somebody I know gets recognition they deserve. Many years ago, I found myself on the opposite side of a table with a very impressive woman. I remember her tenacity as a negotiator, as well as her command of minute details related to the deal at hand. She stood tall at a [...]

2 comments Read more from Dale →

4 Ways To Turn Auction Cars Into Advantage At Your Store


You could say auction cars offer a blessing and a curse for dealers. The blessing is that auction cars are always available—offering a way for dealers to acquire inventory they need that they can’t get through trade-ins. For most dealers, auction cars make up 30 percent or more of their used vehicle inventory. But auction [...]

0 comments Read more from Dale →

NADA 2016 Wrap-Up: A Few Thoughts As The Convention Closes


For much of the past year, I’ve been concerned that dealers might be forgetting that the car business is cyclical. I worried that dealers would take the past five-plus years of record-setting growth in new and used vehicle sales for granted. That they would overlook the reality that the good times simply can’t last forever. [...]

0 comments Read more from Dale →

NADA Day 3: A Touching Moment That Inspires And Transcends


I need to go off the reservation for today’s NADA dispatch. It’s not that today’s time on the NADA exhibit floor wasn’t noteworthy. Rather, it’s because something far more personal and profound occurred elsewhere—at the Baccarat Bar at the Bellagio Hotel. Something that brought tears to my eyes, and that I’ll treasure forever. I had [...]

4 comments Read more from Dale →

NADA Day 2: A Few Firsts From The Floor


It was a lively, long day on the exhibit floor at NADA on Friday. A dealer joked, “Dale, I heard things weren’t going so well, and that you’re selling socks at NADA this year.” The truth is, I was giving away Stockwave-themed socks as part of our launch of the innovative wholesale sourcing solution. I [...]

0 comments Read more from Dale →