5 Inventory Management Tips for Car Dealers

It’s getting harder and harder to make a living with a car dealership. Dealership margins are shrinking more every year, so you’re probably finding that even though you’re selling more expensive cars, you’re making less money on them.

If you want to stay profitable in the car selling game, you need to manage your inventory almost flawlessly. Fortunately, there are tools and strategies available today that make it easier than ever for dealers to keep track of their cars, optimize their inventories, update online listings, and more. Follow these five inventory management tips to sell more cars, make less money, and do less work.

  • Optimize Your Inventory to Meet Market Demand

You can’t just throw any old cars on your lot and expect them to sell. Different makes and models are popular in different areas, subject to local market demand. You need to carefully analyze your local market and optimize your inventory to give your customers the cars they want. 

You can turn to previous sales data to get an idea of what cars your customers are buying. You can also analyze which cars are getting the most attention from customers and the most test-drives. What are customers asking for when they visit your lot? Collect as much market data as you can. How old are your customers? Where do they live? How much money do they make? How do they use technology? What values do they have? What are their consumption habits? How much time do they spend on your website, or on websites in general? The answers to these questions can help you narrow down the right inventory mix to optimize sales. You can use focus groups, surveys, and connected car devices to get them.

  • Use Connected Car Devices to Track Vehicle Status

Do you know where your cars are? Are some cars selling faster than others, perhaps based on their location on the lot? How often are cars getting test-driven? Which cars are getting test-driven a lot, but not getting bought?

You can use connected car devices to track every aspect of vehicle status, including mileage, fuel efficiency, engine performance, mechanical condition, location, and more. Connected devices can also help you gather data on which cars are selling and which are aging on the lot, and can perhaps give you some insights into why. 

  • Keep Online Inventory Listings Up-to-Date and Complete

These days, lots of car buyers have their cars already picked out by the time they get to the lot. Car shoppers increasingly like to use online listings to browse a dealer’s offerings, and who can blame them? It sure beats hanging around in a parking lot in the hot sun. 

But if your online listings are incomplete or opaque, you’re going to lose a lot of sales from customers who will go to a competitor’s website to car shop instead. Your online inventory listings need to be updated regularly, preferably daily. Listings should include all pertinent information about each car, including make, model, year, price, features, and extras. 

  • Manage Your Inventory Based on the Quality, Not the Age, of Your Vehicles

You definitely don’t want a car to sit on your lot too long, because the longer a car ages on your lot, the more of a drain it is on your finances. A car you’re not selling is a car that’s costing you money, period.

Keep your eyes peeled for the early signs that a car is a bad investment for your inventory. Don’t get too caught up in the age of a vehicle you’re thinking about inquiring. Instead, appraise vehicles based on how fast they’ll sell in your market and how much profit you can make on them. It doesn’t matter how old a used car is if it’s a make and model that’s popular in your area.

  • Limit Your Inventory Investment

You should definitely put a cap on how much you’re willing to spend on your inventory. Give yourself a set number of dollars to spend each year, and don’t exceed that cap. You’ll have to do as well as you can with that money, and setting an inventory management budget can keep costs down and limit your losses. You’d be surprised how many dealers only have a vague idea of how much they’re spending on new inventory each year. Don’t be one of them.

Inventory management is your secret weapon in the war against shrinking dealership margins. Juggle your inventory well, and you can see your profits increase, your customer base grow, and your dealership become more and more successful.

Chung Nguyen

Chung is a seasoned business journalist with a focus on sustainability and corporate social responsibility. With over 15 years of experience covering the world of finance and economics, Rachel has established herself as a respected authority on responsible business practices. Throughout her career, Chung has interviewed some of the most influential leaders in the corporate world and has covered major business events such as the World Economic Forum and the United Nations Climate Change Conference. She is also a regular contributor to leading business publications and has won several awards for her work. Chung's passion for promoting sustainable business practices has also led her to author a book on the topic.