Key advice from Dale Pollak on how to prevent aged inventory issues and how Pentana Solutions can help.

Industry Expert and founder of vAuto and Velocity, Dale Pollak, recently shared a success story with us surrounding a 2010-2012 Dealer of the Year at a morning seminar. The takeaway message was simple: DePaula Chevrolet of Albany, New York went from selling an average 60 used vehicles per month to an average month of 130 after deciding to take control of overaged inventory.

The backstory went something like this. DePaula Chevrolet’s Dealer Principal previously went to his comparison meetings and was continously embarassed by his old used vehicle stock - which was quite often in excess of 500 days old. He decided to take drastic action and ended up selling off all the aged inventory at a 200k loss. A 200k loss. His management team put in countless hours to reinvent processes with an inventory management system to implement the massive clean up.

However, the aftermath that followed is nothing short of inspiring. By putting processes in place to gain more transparency in the dealership, DePaula Chevrolet has more than doubled their average used vehicle sales per month. Dale Pollak went on to explain the top 3 reasons how.*

1. DePaula Chevrolet no longer buys or sells cars with bad car history reports anymore. Two buyers now focus on acquiring vehicles with a low market days supply to ensure they sell quickly. The market days supply for the store’s inventory is under 70 days.

2. Managers review the price on every vehicle once a week for nearly four hours as a group. They focus on outliers, implement daily checks and adjust prices whenever they spot a need.

3. The sales team implemented a sales process that emphasises each vehicle’s value proposition based on the market. Every sales team member understands how and why the dealership prices its vehicles.

The dealership now regularly maintains 80%+ of its inventory under 30 days of age, (with Dale Pollak recommending a benchmark of 50%), with none of the roughly 130-car inventory above 60 days old. The data indicates that the team retails most vehicles while they’re fresh and able to deliver maximum gross profit. This impressive turn-and-earn performance comes as the cost-to-market average for DePaula Chevrolet’s inventory hovering near 80%. “If our cost to market gets above 84 percent, we’re sounding the alarm,” says the Dealer Principal.

With the extra volume, the dealership’s front-end gross profit average has improved to nearly $1800/unit. Each sold unit also averages $1,000 in F&I and $350 in service gross profit. Not a bad result for a dealership that once struggled with transparency and lost processes.

Aged Inventory is not a problem specific to DePaula Chevrolet; many dealerships suffer from the same challenges. However, it is a problem that can be fixed and prevented with the right tools and processes in place. Pentana Solutions has several ways to address these issues: ERAnet, Executive ERA and our brand new dashboard release, Pulse. Pentana Solutions’ Pulse is a set of user-friendly, intuitive dashboards created to better familiarise you with your dealership statistics. Pulse is an ongoing initative by Pentana Solutions to give senior management clearer insight into the dealership. With a handle on the facts of your dealership, it’s much easier to address concerns and forecast opportunities.

Like DePaula Chevrolet, with clearly stated facts and figures you’re able to identify outliers and adjust prices where needed. You’re able to clearly view the status of your current inventory and through Carsales.com.au integration, you can also view CarFacts History Reports straight from your DMS screen.Pentana Solutions is giving you the control and transparency you need to stay on top of your results.

*A special thank you Dale Pollak for his insights and further statistics at http://dalepollak.com.