The used-car lot can yield a rich harvest, but it is scattered with land mines, too.
When it comes to managing used-car inventories, "most dealerships are flying by the seats of their pants," says used-car dealership consultant Tommy Gibbs, of Tommy Gibbs & Associates in Treasure Island, Fla.
"Used-car inventories are based on what someone thinks vehicles are worth," Gibbs says. "There is no methodology for keeping track of stock."
And they are more volatile than new-vehicle stocks, says dealer consultant Dennis Puskaric, of Dendi Enterprises Inc. in Hobe Sound, Fla. Values rise and fall constantly.
"At the same time, they are more controllable," Puskaric says. "You can choose what you buy. The manager needs to determine the right mix."
In general, consultants say, dealers need to pay greater attention to how much is invested in each used vehicle, including reconditioning costs.
That is what software vendor Dale Pollak has in mind with his new mPower Auto tracking system. Pollak, a Chicago lawyer and consultant, says his software gives each used vehicle a score. "The typical inventory management system today tells the dealer what he or she has," says Pollak, who grew up working in a family-run Cadillac-GMC dealership. "It does not produce solutions or business directions."
Pollak says the key is how much money is invested in each car, compared with its wholesale value.
"The dealer wants to build equity in inventory," he says.