Pricing vehicles effectively in the market place can be a challenge at times. However, when you do, you can have some serious velocity for the business; not only sales, but fixed operations also. There are a few different pricing softwares out in the marketplace that you can use. The bottom line is you have to use them effectively. I remember several years ago while I was a sales manager, there weren’t pricing tools available that would scan all the different websites. I would have to go to autotrader and cars.com to make sure that I wasn’t pricing myself out of the market. I would also do a KBB on the vehicle to go along with what I found and just shoot from the hip on the pricing with what I found online. Now, those pricing tools have everything that you need with a few clicks of the mouse.
Here is a scenario for you. Would you rather have a gross of $2200 per vehicle sold or would you rather have things priced effectively within the market and make $1400 per vehicle, but sell more cars at the lower gross? Here is a dose of reality that sales managers have a hard time grasping. If you carry a 75 unit inventory and make $2200 per vehicle, but your average inventory age is 50, you would make about $1,642,500 in a year. This includes Finance income of $500 per vehicle and fixed operations making $300 profit on the sales department.
| Used Vehicles Gross Based on Current Inventory( Average Days/Turn) | |||
| Annual Gross Revenue | |||
| Units in Stock | 75 | ||
| Average Age in Inventory | 50 | ||
| Average Turn | 7.30 | ||
| Annual Unit Sales (Units in Stock x Turn) | 548 | ||
| Current Front GPU | $2,200 | ||
| Total Front Gross(GPU x Units Sold) | $1,204,500 | ||
| Current F&I GPU | $500 | ||
| Total F&I Gross (GPU x Units Sold) | $273,750 | ||
| Fixed Ops (70/30) GPU | $300 | ||
| Total Fixed Ops Gross (GPU x Units Sold) | $164,250 | ||
| Total Gross Generated by Used Vehicle Operations | $1,642,500 | ||
Now, if you carry the same inventory and bring your front gross down to $1400 and your average days in inventory down to 30 days, that will bring the bottom line to $2,007,000, a net gain of $365,000 with the same amount of vehicles in inventory.
| Used Vehicles Gross Based on Current Inventory( Average Days/Turn) | |||
| Annual Gross Revenue | |||
| Units in Stock | 75 | ||
| Average Age in Inventory | 30 | ||
| Average Turn | 12.17 | ||
| Annual Unit Sales (Units in Stock x Turn) | 913 | ||
| Current Front GPU | $1,400 | ||
| Total Front Gross(GPU x Units Sold) | $1,277,500 | ||
| Current F&I GPU | $500 | ||
| Total F&I Gross (GPU x Units Sold) | $456,250 | ||
| Fixed Ops (70/30) GPU | $300 | ||
| Total Fixed Ops Gross (GPU x Units Sold) | $273,750 | ||
| Total Gross Generated by Used Vehicle Operations | $2,007,500 | ||
To me, going with the second scenario would make more sense. However, there are a lot of Sales Managers that don’t see it that way. They go for the gusto and want to be the hero in making the most money for the department on bigger deals when they would be doing justice for the company to go for a little lower gross and turn the inventory faster. The second scenario, you would be selling 365 more vehicles (30 per month) at a lower gross per vehicle, but making more money for the company in the long run. The more effectively you price your vehicles, the more clicks you will have on those third party websites, therefore, more floor traffic, and more sales. Cheers to good selling!
Automotive Sales Strategies from Jim 