Industry, Shipper

The Cost of a “Sitting Car” in a Lot, and How to Avoid It

by Ben Price

Typically, consumers are more interested in the newest and latest products on the market, with older products becoming less attractive as they become more outdated over time. Therefore, making room for new products and inventory is absolutely essential – this sentiment couldn’t be more true for the automotive industry.

If your dealership consistently experiences “sitting cars” in your lot, then you’re not alone. This is a regular occurrence for many dealerships across the country, and it can cause an assortment of problems for businesses. Today, we’ll be discussing the costs and issues that a “sitting car” creates for auto businesses, and what can be done to avoid it.

What is a “Sitting Car?”

Sometimes referred to as aging inventory or lot rot, sitting cars are any vehicles on a dealer’s lot that have gone unsold for more than 45 days. Sitting cars are bad for business for a variety of ways including being harder to sell, cost more to hold, and lowers earning potential.

The ICDP estimates that lot rot affects $100 billion in inventory every month, with virtually all vehicles on one’s lot being prone to becoming a sitting car. Here are the biggest ways that you can try to avoid sitting cars in your lot.

Minimize Inventory Age

Most car dealerships have very limited space for inventory, therefore it’s important for dealers to sell their inventory as quickly as possible in order to make room for newer models. You can minimize inventory age by making the goal of retailing as close to 50% of your inventory within 30 days of it arriving on the lot, which will help to maximize your front-end gross.

Because cars are a depreciating asset, the longer you have a car on your lot, the less money it is worth. Faster inventory turnover equals higher profit margins, and newer inventory is also more likely to attract potential customers.

Make Adjustments Based on the Market

Always do your research, so that you’re well aware of what is selling well in your area. If trucks and SUVs are performing better than other models, then prioritize getting them on your lot. Additionally, if you have certain luxury models that are more scarce, then price them for profitability. Consumers will pay more to get a vehicle that’s in high demand and hard to find.

Set a Strict Inventory Turn Policy

While dealers in the past would sometimes let unsold cars sit on their lots for 90 or even 120 days, the standard is now just 45 days for letting cars sit because of rising vehicle costs. Setting a strict policy is one of the best ways to prevent sitting cars, as cars now lose their front-end profit potential faster than ever before. 

So if you fail to sell a car before 45 days, maybe reconsider its price point in order to move it quicker. Many dealers re-price their inventory on a regular basis, lowering their prices until their inventory sells.

Invest in a Good Inventory Management System

You can easily avoid sitting cars in your lot if you properly manage your inventory – this means investing in a good inventory management system (IMS). IMS software allows your business to track past performance of previous inventory, see what the local demand is for certain models, and help you better understand the market to prevent oversupplying your dealership with vehicles that will fail to sell quickly.

A good inventory management system will help you better understand the market, and learn how to strategically build your inventory with models that will sell faster, and more consistently.

Consider Online Car Sales

Of course, another valuable tactic to implement is to offer online car sales. Online car sales open up your dealership to a much wider customer base, so that you can sell to consumers on a nationwide level. This can help your dealership to get rid of sitting cars even faster, by selling vehicles that might be in low demand locally, but may very well be in demand by consumers who live on the other side of the country.

Try Super Dispatch

Whether you decide to opt for online car sales or not, you’ll also want to invest in both a load board and auto transport software. Super Dispatch is an all-in-one transportation platform that packs in both an advanced loadboard and Shipper TMS (transportation management software) into one convenient and ease-to-use system. 

Users can easily find trustworthy car haulers in their area, track their shipments, receive electronic BOLs, and much more – making auto transportation easier and faster than ever before. If this sounds like something that your business could utilize, then consider requesting a demo today!

Published on November 14, 2022


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