Elevating Your Game: The Art and Science of an Optimal Inventory Mix

Elevating Your Inventory: The Art of Acquiring Used Vehicles

Managing a car dealership is a complex balancing act, especially when it comes to inventory management. The constant fluctuation in demand, supply shortages, and market trends often leave dealers struggling to find that elusive "right mix" of vehicles on their lot. Too much inventory can lead to aging cars that drain profitability, while too little can cause missed sales opportunities. For many dealers, the root of the problem lies in one critical aspect: a lack of strategy.

In this blog post, we’ll explore how dealers can take a strategic approach to inventory management, utilizing tools and techniques that streamline processes, right size your stock, and, ultimately, increase profitability. We’ll look at common pitfalls dealerships face and how innovative solutions can help you overcome them.

A Long-Standing Inventory Management Challenge

Most dealership owners have faced it: the feeling that their inventory is never quite right. Sometimes, there are too many cars sitting idle; other times, you’ve got too few to meet customer demand. And on the rare occasion when the balance seems just right, it never lasts long. What’s often missing in these situations is a clear strategy.

Dealers typically rely on past sales data, gut instincts, or past practices when stocking their lots, but that’s not enough. The market changes, customer preferences shift, and production/supply chain issues can make inventory management unpredictable. Simply put, you can't rely on what worked yesterday to plan for tomorrow. Without a clearly defined acquisition strategy based on current market conditions, you risk stocking the wrong cars, overpaying for vehicles, or carrying inventory that doesn’t sell quickly.

• Developing a Strategy for Inventory Mix 

The first step in solving the inventory puzzle is to develop a comprehensive strategy. What kinds of cars does your dealership want to sell? It’s not just about selling more cars — it’s about selling the right cars for your market and your business goals. This involves asking critical questions like:

• • • •  What segments are in demand? (e.g., compact SUVs, mid-size sedans, electric vehicles)
      • What price points are customers looking for?
      • What channels do we expect to source specific vehicle segments outside of trade-ins? 
• Accessing Multiple Channels for Vehicle Acquisition 

Once you’ve established your strategy, the next challenge is sourcing the vehicles that meet your inventory needs. In the past, dealers primarily relied on trade-ins and auctions to fill their lots, but the game is changing. With fewer cars entering the market, dealerships are now looking beyond traditional channels to keep their lots stocked. Today, successful dealerships are using a variety of acquisition channels, such as:

• • • •  Kelley Blue Book Instant Cash Offer (KBB ICO): Leveraging KBB ICO expands their access to used vehicles.
      •  Service Drives: Dealers are encouraging customers who bring their cars in for service to sell their vehicles, tapping into this valuable source of inventory.
      • Private Party Listings: Platforms like AutoTrader, Craigslist, and Facebook Marketplace are rich sources of used vehicles. Dealers are actively mining these sites to find the right inventory.

While additional channels have become critical, they require effort and time from your team if you expect success. And how can you avoid the problem of your team constantly searching for and evaluating vehicles without getting desperate or failing to bring any home? That’s where technology can step in.

Leveraging Technology for Efficiency

Managing multiple acquisition channels can be time-consuming and labor-intensive. A dedicated buyer might spend hours combing through listings on different platforms, but technology can dramatically streamline this process.

Innovative tools, such Global Search, an enhancement within ProfitTime GPS®, bring all these channels into one interface. With its omnichannel sourcing platform, dealers can set filters based on their specific inventory acquisition strategy — selecting the years, makes, and models they want, as well as investment objectives. The system automatically pulls in relevant vehicles from up to seven sources: auction, off-lease, service drive, Kelley Blue Book® Instant Cash Offer, private party listings via VAN, missed appraisals, and dealer trades, making it easier for the dealership to acquire cars that align with their strategy. This type of technology not only makes the acquisition process more efficient but also helps dealerships avoid overpaying for cars or buying vehicles that don't fit their desired acquisition strategy or market. Here are some ways that Global Search features can improve your dealership inventory strategy:

1. 1. Establishing Investment Parameters

One of the key aspects of a solid inventory strategy is setting clear investment parameters for the types of vehicles you want to bring into your dealership and with Global Search you can access to nearly 1 million vehicles available for acquisition.

Some dealers prioritize volume over profit margins, opting to buy a wide variety of cars at different price points. Others may be more focused on maximizing profit on each sale, setting higher thresholds for the vehicles they purchase. By establishing these parameters in your acquisition strategy and linking how much you should pay for a vehicle to how much you need it, you can ensure you’re consistently buying the right cars that meet your dealership’s goals, whether that’s maximizing volume or profit.

2. Measuring and Refining Your Strategy

Even the best strategy needs to evolve. Market conditions change, and what works one month might not work the next. That's why it's important to regularly check how well your inventory strategy is working and make changes if needed.

For example, you might see that your effort to acquire vehicles from the service drive isn’t working as well as expected. Is that because your strategic expectations were off or your team isn’t as effective as they could be? Either way, this moment of discovery suggests a need to adjust your strategy or process. Conversely, if you’re seeing more success than you expected with private-party acquisitions through Facebook Marketplace, you may decide to adjust your strategy and focus more resources there.

The key is to consistently measure your performance across all channels. Global Search can help here too, providing insights into which channels are yielding the most profitable vehicles, which types of cars are selling fastest, and where your acquisition strategy might need fine-tuning and helping establish the right exit strategy for every vehicle you appraise and acquire.

3. Staying Agile in a Changing Market

Finally, it’s important to recognize that inventory management isn’t a “set it and forget it” process. The market changes with the seasons, economic conditions, and consumer preferences. Your strategy review should be frequent enough to adapt to or even anticipate these shifts. Check your inventory levels often. Review your buying strategy too. This will help you stay flexible. It will also ensure you have the right number and mix of vehicles for any market situation.

Getting it Right

The key to effective inventory management is a clear, well-defined strategy that aligns with your dealership’s goals and market conditions. By leveraging innovative tools like ProfitTime GPS’s Global Search you will be able to access multiple acquisition channels and regularly measuring your performance, you can solve the “right mix, right number” problem and ensure that your inventory is always working for you, not against you.

For dealers who want to streamline operations, increase profitability, and reduce the long-standing inventory inefficiencies, embracing a strategic approach to vehicle acquisition is the starting place for a new way forward. Through technology platforms like ProfitTime GPS Global Search, the dealerships that plan, measure, and adjust their strategies will be the ones that thrive in today’s competitive market.

To learn about how vAuto’s new innovations can support your inventory management strategy and profitability, request a demo today.