Whilst the used vehicle trade is very much an area where true talent and creativity lies in the motor retail space, there are numbers that are important and interrelated in a traditional franchised used vehicle department.
The relationship between the numbers may vary from dealer to dealer but there will always be a relationship. I am assuming that your location supports your sales volumes.
What are your sales volumes? Let us assume forty vehicles per month for illustrative purposes.
How many vehicles can you display? If your sales volumes are 40 per month and you turn your stock once a month, I would suggest that you always need to display at least 30 vehicles. You will always have stock that is in reconditioning and that will take care of the other 10 vehicles. In summary, you should be able to display at least approximately 75% of your going rate.
What capital or funding do you require? I would estimate that you will need 50-55 days’ funding or roughly 140%-150% of your stock based on sales of 40 vehicles and a stock holding of 30 days stock. This should take care of vehicles invoiced and awaiting payment, reconditioning time etc.
How many salespeople do you have? My estimate will be 3-4 salespeople who will take care of leave, sick leave, training and other needs.
How many enquiries do I need? If your vehicles are advertised and priced correctly and your sales process is efficient, you should have a closing ratio of 20%. (Deals as a percentage of enquiries). This means that your advertising should be targeted to drastically reduce low quality enquiries. You then need to generate two hundred enquiries spread evenly over your stock holding.
From an activity perspective it means that each salesperson should receive 2-3 enquiries a day and if it takes 10 days from enquiry to deal, each salesperson will be working on 20-30 deals at a time. You need to know the spread of enquiries across your stock holding.
Whilst the relationship between these numbers varies from dealership to dealership, it is important to know what your numbers are. The numbers in this article are achievable and there are dealerships that are achieving or exceeding some or all of them.
I just need to emphasize that low quality sales enquiries are the enemy of efficiency. They are a waste of advertising expenses and a waste of your staff’s time. A fantastic indicator of a poorly run used vehicle department. If you are getting more high-quality enquiries than your salespeople can deal with, it is a sure sign that your business is ready for growth.
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