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This is not the time for speculation.

Many dealers are asking what they should be doing with preowned inventory levels with the impending UAW strike approaching. Many are worried about not having new cars to sell and want to increase preowned inventory levels to offset the lack of new vehicles. What should they do?

     Well, first off, the manufacturers haven’t been just sitting around hoping to avert the strike; they know it is very likely to come to fruition. These companies are shrewd and have been through this before. They aren’t going just to sit idle and let the union shut down their businesses. The first and foremost plan was to run 3 shifts of production to increase the new vehicle fleets to keep the availability of new vehicles during the strike. Have you noticed you are getting more allocation lately? Is this by coincidence? I think not. So, is panicking over new vehicle shortages due to the strike having you thinking of bulking up your preowned inventory?

     If so, let’s look at why I don’t think it is a good idea. First off, if dealers start to panic buy and drive up used vehicle prices at the auction, they are not paying attention to the retail market. Over-inflating values will be devastating to inventories. Let’s remember that over 60% of American households today are living paycheck to paycheck. Also, consumer credit card debt is at record levels, and as we all know, interest rates are very high. All these factors contribute to the fact that over 70% of preowned vehicle sales transact under $35,000. With only 8% of new vehicles having an MSRP under $30,000, most new vehicles are out of reach of the average consumer. Basic economics will limit the sale of over-inflated prices on pre-owned vehicles.

So, if you go and bulk up your inventory at inflated prices, odds are it may have a devastating effect on your profits. In today’s market, the cost to market on vehicles is climbing faster than ever as your inventory ages. I have seen the CTM increase 14%-20% in 60 days. The higher the vehicle cost, the faster the increase, thus stripping the profit from the vehicles. The second factor of decreasing profit is chasing the market by lowering the price as the vehicle ages. This is usually due to the overpricing when the vehicle is first priced. Most dealers want to take a shot! In actuality, the vehicle should be priced in the market to transact on day one. My philosophy is price to sell day one, the next price would be to get rid of the vehicle. I suggest that by day 25 in inventory, we need to look at an exit strategy. In today’s market, vehicle profits disappear after around 30 days in inventory. The higher the priced vehicle, the bigger the loss.


  I suggest staying the course, not overstocking speculation, and turning your vehicles in the first 30 days; the quicker, the better. Just keep in mind that Time Kills Profit.

-Bill Raynal

Inventory Analyst



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