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How to build a better used car stocking profile

Thurlow Nunn, with 11 Vauxhall sites between Great Yarmouth and Milton Keynes, sells about 3,500 used cars annually. Simon Bottomley, chairman and group managing director, said: “Tight inventory control is the key to used car profitability.”

Thurlow Nunn uses a 60-90 day policy where cars are marketed more competitively after 21 days, with disposal in mind from 60 days and cars gone by 90. The group works like this because of the potential high depreciation involved with stocking cars for a long time, together with the need to achieve a yield for each forecourt space.

John Banks Group, a family-owned dealer group in East Anglia, also prioritises profit, but it is looking at implementing a much more regular stock turn policy. Between September 2013 and September 2014, it sold 1,600 used cars, but it wants that to increase along with efficiency and profitability. That means marketing and pricing strategically.

Mike Smallbone, used car operations manager, said: “We have Google Analytics and our own reports, which we run and analyse from our Pinnacle DMS.

“We use the usual CAP and Auto Trader, but also monitor what is happening within the auction environment to ensure we are up to date with current trade prices.”

 

Financing the used car stocking policy

Dealers wanting to grow their used car stocks cannot do so without the funding. Many franchised dealers rely on their manufacturer’s primary funding house, but capital, bank lending facilities and overdrafts are also used.

There has also been growth in recent years in motor auction groups providing their own funding lines. BCA launched BCA Partner Funding last year to assist independent used car dealerships to increase their stocks, a move echoed by SMA Vehicle Remarketing.

NextGear Capital, owned by Manheim’s parent Cox Automotive, has funded £40 million of used vehicles for dealers since its UK launch earlier this year. Managing director David Mercer said: “Franchised dealers have traditionally been well served by manufacturers’ finance companies when it comes to stock funding for new vehicles. However, in recent years, more franchised dealers have been expanding their used vehicle sales operations.

Thurlow Nunn uses Lombard for funding. Vertu Motors doesn’t use external funding at all.

Vertu’s Ferry said: “As opposed to companies who fund through external sources, our money is always there, so if there is any reason we needed money, we can just sell the cars and recoup that back. If you have bought the car via some other financial means, it just pays off the debt, which doesn’t help the situation for needing the money in the first place.

“When re-stocking or buying, our first point of call is another internal dealership, rather than buying in more cars.”



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Comments

  • David Derbyshire - 15/12/2014 14:43

    Whilst I cannot argue the point it is speculative. If the dealership reduced the price by a further £150 and turned the stock 12 times per year the profit would increase even more.I believe your statement offers no more than the basis for discussion, in this you have succeeded

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