Understanding Your Stock Turn To Grow Dealership Profits
19th November 2024
For car dealers, monitoring stock turn is key to identifying room for improvement and maximising income potential, to improve their business profits. This makes it essential for dealerships to fully understand the term ‘stock turn’ and how to calculate the figure.
Modern dealer management systems allow car dealers to easily track key statistics regarding their vehicles in stock and total costs, providing them with all the information they need to make better-informed stock decisions that can significantly boost dealership profits.
Learning how quickly each of your cars takes to sell can influence the type of vehicles you bring into the dealership, allowing you to buy more of the stock that sells fast and less of the stock that sits on the forecourt for long periods of time. If your dealership can sell cars quickly, your profits will increase because less money needs to be invested back into your stock. How often you can sell your stock across the year is known as your stock turn.
To calculate the stock turn, car dealers simply need to work out the number of vehicles they have sold in a year and divide that number by the current size of their stock. For example, if you have sold 900 cars over the last year and there are 80 cars currently on the forecourt, you’ll do the equation 900 ÷ 80. This will give you 11.25, which is known as your stock turn ratio, indicating how many times your dealership turns stock over in one year.
Car dealers typically aim for a minimum stock turn ratio of 8, amounting to a stock turn every 45 days, although there are improvements you can make to achieve a higher figure if your stock turn ratio isn’t quite the number you hoped for. Quick fixes are possible, such as by simply acquiring less stock, however if you want to grow your dealership then you’ll want more productive solutions.
Selling cars back to trade or sending them to auction if they are still sitting on the forecourt after a set amount of time will keep you in control of your stock turn and allow you to replace them with other vehicles that are more likely to attract a buyer. As an example, if you wanted to achieve a stock turn ratio of 8, then you would look at replacing unsold cars after 90 days, after initially expecting them to be sold within 60-90 days of being advertised.
The most successful car dealerships make a habit of consistently monitoring the age of their stock so that they can act before profits are affected by vehicles that are failing to sell within a designated time period. They will also be closely following industry trends, identifying what’s popular with car buyers during certain times of the year and using this information to purchase stock accordingly.
The DragonDMS dealer management system offers car dealers instant access to key vehicle metrics, such as how long a vehicle has been on the forecourt, the stand in value (SIV), total expenditure and more, so that you can pay close attention to your profit analysis and make key stock decisions at the earliest opportunity.
Over 1,000 car dealers are currently using Dragon2000’s software to gain essential insights into the way their dealership operates and simplify daily processes. If you would like to find out more information about our car dealer software, please contact our sales team on 01327 222 333 or email sales@dragon2000.co.uk.
Dragon2000 have been helping dealers and garages drive their businesses forward since 1995. Contact our sales team today to find out how our dealer management system and car dealer websites can help your business increase profits and reduce costs. Our mobile apps for sales teams and workshops can also help save valuable time and maximise efficiencies.
