There are several key metrics which need to be monitored to maximise profitability and ensure efficiency in running a used car operation. Here are some of the key ones.
Stock Units
Calculation: Count of all individual vehicles in the dealership’s inventory.
Importance: This gives a clear picture of inventory size, which is crucial for managing stock levels, planning sales strategies, and understanding purchasing trends.
Average Age
Calculation: Sum of the ages of all cars in stock divided by the number of stock units.
Importance: The average age helps to identify how fresh the inventory is, which can affect the ease of sale and the pricing strategy.
Price to Market
Calculation: Average listed price of vehicles divided by the average market price of similar vehicles, expressed as a percentage.
Importance: Understanding how competitively vehicles are priced compared to the market is vital for positioning them for quick sale and ensuring profitability.
Inventory Turns
Calculation: Number of vehicles sold in a period divided by the average inventory for that period, annualised.
Importance: High turnover indicates efficient inventory management and sales processes, while low turnover can signal overstocking or poor sales performance.
Total Cost
Calculation: Aggregate cost of acquiring all vehicles currently in stock.
Importance: Keeps track of investment in current inventory and is essential for financial planning and budgeting.
Average Stock Price
Calculation: Total cost divided by the number of stock units.
Importance: Helps in assessing the average investment per vehicle and in comparing with average selling prices to ensure profitable pricing strategies.
Total Market Wholesale Value
Calculation: Sum of the estimated wholesale values of each vehicle if sold at current market rates.
Importance: Offers insight into the potential revenue if the inventory were to be liquidated at wholesale prices, assisting in evaluating the overall inventory value.
Cost to Market Wholesale Value
Calculation: Total cost divided by total market wholesale value, expressed as a percentage.
Importance: Indicates how the dealership’s investment compares to the market, highlighting the potential profit or loss if inventory is sold at wholesale.
Total Stock Retail vs Sweet Spot
Calculation: The total potential retail value of inventory compared to the identified pricing “sweet spot” where sales are maximised.
Importance: It helps in pricing optimisation to achieve maximum sales volume and profitability.
Total Market Retail Value
Calculation: Sum of the potential retail selling prices of all vehicles in stock.
Importance: A gauge for the maximum possible revenue that could be generated from current inventory at retail pricing.
Cost to Market Retail Value
Calculation: Total cost of inventory divided by the total market retail value, expressed as a percentage.
Importance: Measures the markup from cost to potential retail price, indicating profitability.
Current ROI
Calculation: (Total revenue from sales minus the total cost of sold inventory) divided by the total cost of sold inventory, expressed as a percentage and then annualised.
ROI = (Used Vehicle Gross Profit ÷ Used Vehicle Cost) × (365 Days ÷ Days Car Took to Sell)
Importance: Shows the return on investment for the dealership of that particular car, taking into account profit as a percentage as well as the speed of sale.
Advertised Gross
Calculation: The sum of the differences between the advertised price and the purchase cost of each sold vehicle.
Importance: Reflects the profitability of sales based on advertised prices, helping to assess the effectiveness of advertising strategies.
Price to Market by Age
Calculation: Average selling price of vehicles within certain age brackets compared to the average market price for similar-age vehicles.
Importance: Helps in determining if pricing strategies need adjustment for older or newer vehicles to remain competitive.
Price to Market by Make
Calculation: Average selling price of vehicles by make compared to the average market price for similar vehicles from the same make.
Importance: Helps tailor pricing strategies for different brands to capitalize on brand popularity and market trends.
Total Sold Gross Profit
Calculation: Sum of the differences between the selling price and the purchase cost for each vehicle sold.
Importance: Indicates overall profitability from sales, helping to understand the effectiveness of the sales strategy.
Average GP per Unit
Calculation: Total sold gross profit divided by the total number of vehicles sold.
Importance: Provides a measure of how much profit, on average, is made from each vehicle, important for assessing individual vehicle performance.
ROI by Age Graph
Calculation: Graphical representation showing the ROI for vehicles sold, categorized by vehicle age.
Importance: Visualizes which age categories are most profitable, assisting in inventory selection and purchasing decisions.