Auto Credit Express Blog
May 5, 2008
Evaluating your used car inventory
For subprime managers everywhere, the used car inventory has always been an issue. Now, with changing market conditions, the subprime and prime used car inventories should be closer together.
Remembering the bad old days
It wasn’t that long ago when the needs of the used car manager and the wants of the special finance manager were at opposite ends of the spectrum. From the early 90’s until 2006, all the used car department wanted were trucks and sport utility vehicles. These were the hot vehicles – the ones that sold and the ones that they could make a good gross on. In order to put more customers in these kinds of trucks, the used car manager would often put more money into small car trades. This meant that even though you had the Neons, Cavaliers and Escorts in stock, they were often booked in at trade value or above.
For the special finance manager, inventory issues were a common problem – especially if the dealer was not backing the special finance department and insisting on the right mix of vehicles.
That was then, this is now
According to recent sales figures, the shift away from trucks and large SUVs to more fuel-efficient small cars has happened more rapidly than even the manufacturers anticipated – and this includes most of the Japanese manufacturers (we can’t blame it all on Detroit this time). A case in point – while Ford Motor Company reported a 21% drop in sales of its F-series pickup in April, the redesigned Focus experienced a 43.5% increase in sales over the same period.
It also appears that the used car market is reflecting what is going on in the new car market – not surprising, since the high price of gas is behind the shift in both markets.
What this means to the special finance department
The shift in buying patterns is playing right into the hands of the special finance department. With the shift towards smaller, more fuel-efficient cars, the used car department will need to focus more on this segment. Not only will you be seeing more cars in the used inventory, these cars will be, generally, smaller and more economical. Since the used car manager will need to make money on these cars, they also will have to be purchased correctly – at or below trade value.
What you as a special finance manager can do
This would be a good time to share your expertise with the dealer principle as well as the used car manager. Arrange a meeting and let them know which vehicles can be purchased “right” and what kind of equipment and mileage they need to have so they can be used for either conventional or special finance. This will eliminate the need for two different inventories, saving the dealer floorplan expense.
The bottom line
With the changes in the market, now is a good time to begin a new era of cooperation between the used car department and the special finance department. By pooling your expertise, you can save the dealer money and increase profits for everyone.
