Monthly Pre-Owned Cadence

October 1, 2020

  1. Ensure a healthy Trade Lane: Check Appraisal Closing rate against your benchmark (we recommend 40%). Check Average Immediate Profit/Loss. Is it outside of the +/- $250 range? If so, assess the business impact of buying deals or losing retail transactions due to under-bidding trades. Discuss process with the used car manager, if necessary.

  2. Check your Unit Profitability and Sales Velocity: Making the most of your inventory investment means supporting the strongest profitability while understanding the diminishing value and increased holding costs over time. We recommend monthly review here using a consistent most recent 13 weeks of data for perspective. To calculate inventory turn take, see simple equation below.

    (365 days)/(Average Days to Sale) = Annual Inventory Turn.

    Check front end profitability as units age to ensure pricing strategy is being adhered to as you look at the monthly results.

    On MAX Platform: Under “Performance Management Reports”, click on “Gross Profit by Days in Stock” to easily view the impact of inventory age on gross profit. This report also shows front end profitability as units age. Also review your “Water Report” to identify leaks in profitability and value.

  3. Check Your Retail Sales Efficiency: Check Retail & Aged Wholesale percentages as well as Average Front End Gross and True Average Front End Gross. Ensure that Aged Wholesale losses (retail failures) are not eating too much into profits. Next, check percentage of units and Average Front End Gross for each aging bucket. Where do you stack up against your benchmarks (65% under 30 days, 20% 31-60 days, <10% +60 days, Aged Wholesale)? Check Average Days to Sale for the 60+ and Aged Wholesale buckets to ensure aging policy is being adhered to. Check % of Green Light units being sold in these last two buckets as well. Why are you struggling with those units?

    On MAX Platform: Under “Performance Management Reports”, click on “Retail Inventory Sales Analysis” which highlights all of these opportunities.

  4. Reign in Aged Wholesale Losses (if applicable): If there are substantial aged wholesale losses or a large percentage of inventory is winding up in this bucket, review individual units and strategize with the used car manager and/or buyers on how to avoid repeating past failures. Conversely, strategize with the sales managers and sales teams on how to get better at selling problem units. Is there a different sales strategy, a bargain lot, for example that can help these current losses play a more positive role within your mix as you bring your inventory back in balance?

    On MAX Platform: Pull a “Wholesale Breakdown” report under “Performance Management Reports” for analysis to support the discussion.

  5. Check overall revenue and profitability: Review Business Development Center lead quality. Optimize mix towards higher performance rates based on summary of all leads by source with closing rates. Review full department expenses with the general manager. This monthly line item review ensures consistency and maximizes product assortment.

If your team is struggling with any metrics or needs help benchmarking for success, the MAX Digital team is available for guidance & user process training.