How To Improve Your Vehicle Inventory Management [11 Tips]

Want to take your automotive business to the next level? Ready to go from just meeting the bottom line to turning in a profit month after month? Exceptional automotive inventory management is the critical piece missing from your business plan.

There are a lot of moving parts that make up your inventory, so it’s easy for the best optimization intentions to get lost in the shuffle.

We’ve put together these 11 tips to help your dealership improve its vehicle Inventory Management.

Invest in Automotive Inventory Management Systems

Dealer management systems (DMS) are the tool of the modern day dealership. According to fi-magazine “Dealers who use inventory management systems realize quicker vehicle turns and a higher ROI than dealers that don’t.” 


DMS and IMS use customized tools and resources for dealers to manage their inventory, leading to rapid vehicle turnaround and increased ROI. As management software integrates with supporting systems and websites, dealers have access to a more comprehensive view of the automotive environment.

Pro Tip: When upgrading your inventory management system, focus on mobile compatibility. The ability to make quick changes to your inventory - whether pricing, photos, comments, etc - can create efficiencies for inventory management throughout your busy day. 

Conduct An Inventory Analysis

To improve your vehicle inventory management, you must first understand the inventory you have on your lot. This means running an inventory analysis to gather the accurate information needed to make informed profitable decisions. Personal estimations or gut feelings won’t work.


Conduct a regular inventory analysis with your inventory management software (IMS) and assess every vehicle on your lot, including incoming trades and vehicles planned for disposal.


By the end of your review, you should be able to identify these key qualities for the optimal vehicles in your inventory:

  • Turnover Cycle 
  • Average Buy and Sell Times
  • Price Parameters
  • Average Acquisition and Disposal Times

Evaluate Your Website

To improve control over your inventory online, you need to optimize your website and digital presence. Buyers continue to start their buyer’s journey online. Long before they make it to your dealership, they’re doing their research. If you have great vehicles with high-value features, your digital retailing should reflect that.

For more tips on how your dealership can improve the digital buying experience check out our blog post: Personalizing The Dealership Digital Buying Experience.


Proper Inventory Sourcing

Proper Inventory Sourcing

Getting your inventory for the right price is critical for any profitable inventory management plan. To do so, a  dealership’s sourcing strategy should establish:

  • How often wholesale vehicles are acquired
  • Where wholesale vehicles are acquired
  • Parameters for trade-in decisions
  • Remarketing efforts

When adding vehicles to your inventory, make sure you understand both their condition and the demand for the vehicle. The only thing worse than a junker you can’t sell is a clunker no one was interested in in the first place.

Whether you’re sourcing vehicles from wholesale, trade-ins, or auctions, it’s important that you gather as much information on the car’s history as possible. That data will be invaluable for adding transparency to your website and building trust with potential buyers.


Don't Procrastinate

While it’s important to be adaptable, you don’t want to react to the market. To stay on your toes, use your regular inventory evaluations to conduct proactive plans for the future. 

For optimal performance, a proactive dealer strategy should include plans for buying and selling vehicles based on:

  • Gross profit
  • Return on investment (ROI) 
  • Average turnover time
  • Average cost of sale 
  • Seasonality
  • Evaluation and appraisal best practices
  • Age 
  • Competitive pricing for your local market

With help from your IMS, you can make educated forecasts for the future of your dealership and stay ahead of your competitors.


Know Your Vehicles' Markets

If you want to understand the vehicle market instead of acting on instinct, you need accurate market data on both your dealership and the competition. Tools such as automotive marketing software, are great for market comprehension.

With this data, informed decisions about ideal vehicles, price range, and key selling points, you have all the tools needed to source killer inventory and gain attention online.


Diversify Your Inventory

Diversify Your Inventory

Any successful business leader knows diversifying your investments is smart and the same is true about your inventory. Don’t crowd your lot with a single make or model, even if you’re a franchise owner. 

You could unintentionally take yourself out of consideration for buyers that are ready to change brands. Furthermore, you could sow internal competition between used and new vehicles of the same make and model. Using IMS to track sales by make, model, manufacturer, and more, makes finding the right mix easier than ever before.


Order Based Turn Over

Thanks to your regular inventory analysis, you know what patterns of vehicles have a higher turnover than the rest of your stock. Talk with your sales and management team to discuss stocking those vehicles over other options. 

If you discover that customers are asking for vehicles that are out of stock, however, take note. Listening to customer needs is crucial for determining what vehicles are worth keeping on your lot.


Price With Transparency

Today’s internet users have access to information on just about everything, including the vehicle market. It does you no good to hide vehicle pricing behind a sales call or an in-person visit. There’s a good chance that information is on a competitor’s website. If it’s not on yours, not only is that suspicious, but you likely lost a sale to that competitor. 


Being transparent online is critical to building trust. Tools like C.A.R.Score make information about the pricing, condition, and history of your vehicles easy accessible on your website.

Pro Tip: Transparency is just one part of improving the car buying experience. For more on this topic, check out our article on How to Improve the Car Buying Experience.


Price Vehicles Based On Time

Price Vehicles Based on Time

Prioritizing older vehicles is one of the most important things you can do to improve your inventory management. The longer a vehicle sits on your lot, the lower the price. If you’re not careful this can severely undercut the huge sales you make on new cars.

According to “the best practice is to hold 50% of aged inventory for a maximum of 30 days from acquisition. All used vehicles should be sold within 45 days. If it doesn’t sell in that time it should be wholesaled.” 

Looking at that advice in practice, a fresh car might be valued at 98% of the local market. If that car doesn’t sell within two weeks, use your inventory analysis and market data to decide if dropping the price to 95% of the market value is the right choice. By pricing your inventory based on time, you’ll be able to manage depreciation and focus on moving aging inventory.

Pro Tip: No one wants to buy a damaged car, so invest in small fixes when vehicles need reconditioning. Correcting obvious issues will decrease the sell time, especially for luxury vehicles.

Share Your Stock

If you find yourself with an abundance of a certain vehicle brand, try teaming up with other dealers selling the same brand. By pooling selections of your inventory you can work together to make room for new vehicles you’re looking to bring onto your lot.

Make sure that dealers you’re partnering with are close enough that pooling your inventory isn’t inconvenient, but that they’re far enough away that you don’t compete with them directly.


Now Its Your Turn

Optimizing your inventory management is crucial to running a successful dealership. 

Leave a comment letting us know which tip helped you the most, or if you think there’s something we missed. 

Your tip could be added to this article in a future update.

Popular articles on inventory management

Back to Blog