Effective Inventory Management Strategies for the Looming Used Cars Oversupply

In most countries, the used cars market has already hit its long-forecasted tipping point into an oversupply. The volume of used cars being auctioned has tremendously increased with many car models beginning to fall in value. This period of general oversupply is expected to continue throughout the year into 2017 and beyond as increasing number of vehicles are introduced into the market.

With this influx, it is imperative for every used car dealership to have a strong and effective inventory management strategy to stay ahead of the competition and optimize other car dealership operations.

Understanding the Basics

As a result of the undersupply of auto inventory in the past few years, many used and new cars dealerships have lulled into the pretense that all they need to care about is pricing and marketing—buying, pricing right, and waiting for customers to trickle. However, this model has proven to only work when supply is tight. Unfortunately, with the predicted oversupply, moving inventory won’t be very simple.

Preparing For the Oversupply

There are many steps that you can take to effectively manage your used car dealerships business in times of an oversupply, including:

1. Be cautious with the type of vehicles that you buy and retail. Never concentrate only on the condition, mileage, history, or age. Focus on supply as well, especially off lease.

2. Be meticulous with the methods you use to merchandise and price your vehicles. Never price yourself way out of the standard market price points—either on the high side or low side. On the lower side, clients will think that there are things that are not right with the vehicles that you stock and on the higher side, they will question your integrity.

3. Take good control of your aged inventory. Remember that an increase in supply of used cars in the market is never a short-term problem. Endeavor to find ways that you can use to tighten your aging policy and institute strategies that you haven’t explored. The longer you wait to deal with your aging inventory, the bigger will be your wholesale loss.

Bottom Line

A mindset that is only centered on marketing and pricing will not be sustainable when there is an oversupply of used cars in the market. Accordingly, every car dealership should do an internal health check to ensure that they are managing their whole inventory processes effectively. The most common but avoidable mistake committed by both used cars and auto parts and service dealership alike is often made on stage one: owning the wrong type of car or accessories or owning the right ones for too much money. Always strive to know the car or accessories you’re purchasing as well as your sales history and past market data.

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