As margins shrink on vehicle sales, dealers are forced to sell more vehicles to maintain profits. Every dealer knows time is money, and the longer the vehicle sits on the lot, the greater the holding cost per vehicle. One area dealers have room to improve is the time required to deliver their vehicles to the market. Studies show that dealers who list vehicles online faster, sell vehicle faster, cutting down on the holding cost and improving profits.
What is Holding cost? Holding cost is a daily expense on every new and used vehicle that accumulates until the vehicle is sold. Dealers that are able to drive down this cost, enjoy higher gross profits.
What is the average daily cost? Depending on your store, the cost of holding a vehicle after you own it and until it sells is between $25 and $50 per day, per vehicle. Factors that influence this cost are numerous and are different for each store.
Time-to-Market: Is the preparation time needed to add photos, descriptions, discounts and post vehicles online.
Average Time-to-Market: Average dealers need 10 days while top dealers need 3-4 days.
Calculating the cost of preparing inventory to sell online can be achieved with this formula:
Daily holding cost x time-to-market x number of vehicles sold= time-to-market cost
Example: For a dealer selling 50 units per month it looks like this:
$25 per day x 10 days x 50 vehicles sold= $12,500
Looking at the numbers it’s clear time-to-market has a direct impact on profits. Which is why the best dealers strive to achieve a turnaround in 72 hours. Fast time-to-market becomes a priority for dealers looking to maximize profits. Coming out of the gate quickly will drive down days in inventory as well as increase yearly turn rate for your store. Losing 10 days every month waiting for your inventory to get online, is like waiting to tie your shoes after the start of a race.
The numbers don’t lie, quicker time-to-market increases profitability. The faster dealers get vehicles posted online, the faster your dealership turns a profit. A 2016 study by Lotlinx, of 300 dealers found that 81% of vehicles sold when receiving 30 VDP views. The other side of the coin is, only 65% of vehicles sold in 30 days without 30 VDP views. Additionally, those vehicles sold in the 30-day window held more gross than the vehicles outside of 30 days. Losing 10 days while preparing vehicles for market, therefore, has a compound effect on margin compression, increases holding cost and lowers probability of maximizing profits in the 30-day window. Now when you consider some managers will incentives their sales team to move an aged vehicle, the longer you wait to list online the more expensive it becomes.
If your dealership is struggling with time-to-market, AIM Experts has been helping dealers achieve faster turnarounds. The AIM platform was created to give dealers the technology to list new and used vehicles in 24 hours. The AIM platform unleashes the power of automation to give dealers a competitive advantage for managing their inventory. AIM’s mission is simple: make every vehicle you sell more profitable. To learn more contact us today.