The risk of every dealership is in used equipment. So much of a dealership’s profitability is directly tied to its ability to generate cash by selling its used inventory.
The best way to work with the marketing department is to drive content to them. I have worked with some great marketing people — but few have paid attention to equipment inventories because it’s not their job.
The biggest couple of things I heard at the 2017 Dealership Minds Summit included keeping the late model stuff moving and how much new equipment should be sold to support used sales. Most of the customers who can buy late and low are also the same buyers who can by new.
There are two things you have to consider. First, you have to understand the washout cycle. The washout tells you how long you will hold equipment and how many units you will need to sell through to get to a cash/no trade scenario.
When it comes to the future trade-ins, I’m not so much concerned about trying to find a home for the $100,000 combine. What I’m more concerned about is that first and second trade that are $350,000 or $280,000 machines.
Inventory management has become extremely important for larger dealer groups with tens of millions of dollars in inventory and millions of dollars at risk. But even for smaller dealerships where the dollars at stake are smaller, inventory management is still vital.
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