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4 Factors Influencing Used Vehicle Inventory Turn Time

Turn times on unsold vehicles are impacted by many factors

Measuring your dealership’s success? A great place to start is by taking a closer look at your turn times. Turn times refer to a dealership’s inventory turnover rate, a key performance indicator (KPI) which measures the time from auction purchase to payoff. 

Turn times can also indicate a positive cash flow, reduced holding costs, and improved net profit margins—all good signs a dealership is trending upwards. But what goes into these measurements? And how can dealers be sure they’re adjusting the right factors to improve their overall inventory turn times?

Let’s take a look at 4 common factors that influence used vehicle inventory turn times.

Turn Time Factor #1: Title management 

    The stopwatch on inventory turn times begins upon acquisition. Whether purchased through an auction or customer trade-ins, there is an immediate need for effective title management which involves:

    • Ensuring the car’s title is free of errors
    • Obtaining proper signature from the previous owner  
    • Reassigning the title to the dealer
    • Rectifying any mistakes on the title  
    • Complying with title transfer laws 

    Things can become complicated if there are existing liens on the used vehicle. A lien indicates that a third party has a financial claim on the vehicle, usually because there’s an outstanding loan against it. Before the car can be sold, the lien must be cleared, and the lienholder paid off. 

    BONUS RESOURCE: What is an Auto Lienholder?

    This process can be time-consuming, as it involves communication with the lienholder to confirm the payoff amount, arranging for payment, and then waiting for the release of the lien. Any delays or complications in this process can significantly extend the car’s turn time. That’s exactly why AFC offers our lienholder payoff service. We can help verify payoff, remit funds, and follow up on your behalf. Not only that, but we can identify title problems so timely corrections can be made.

    Turn Time Factor #2: Auto transport

    Transportation logistics can also impact used vehicle turn times, especially if the auction is in a different state or the vehicle was purchased from an online auction. Arranging for the vehicle to be transported to the dealer’s lot involves coordinating with shipping companies, which can sometimes be both time-consuming and expensive.

    The distance the vehicle needs to travel, the availability of transportation options, and the efficiency of the transport service can all affect how quickly the car is available for sale. 

    Delays in transportation add to the turn time, tying up capital and resources that could be used elsewhere. Another factor that could impact turn time is a car arriving at a reconditioning center at an unexpected time, this could require your repair team to shift its own timelines for inspections, repairs, and approvals.

    Turn Time Factor #3: Automotive reconditioning process

    Before a used car is frontline-ready for the sales staff, dealerships use the reconditioning process to ensure the vehicle is road-ready for customers. Auto reconditioning is a process of restoring a used vehicle to a condition that is as close to new as possible. 

    Reconditioning is a process made of many steps, like multi-point inspections, interior cleaning, mechanical repairs, and parts replacement—and each of these requires oversight and time management. 

    A thorough and robust reconditioning process could significantly improve a pre-owned vehicle’s appeal and value. On the other hand, if reconditioning efforts are unnecessarily lengthy or too robust it may extend the time it takes to get the car frontline ready and in front of customers for a potential sale. 

    However, it’s not just the results of reconditioning that impact inventory turn times–it’s also about results. This process is crucial to inventory turn time in multiple ways, including:

    • Improved Appeal: A well-reconditioned vehicle is more likely to catch the eye of potential buyers, both online and in person.
    • Higher Value Perception: Customers are willing to pay more for a car that looks and feels new, even if it’s used.
    • Trust and Confidence: Buyers are more confident purchasing a vehicle that has been thoroughly inspected and reconditioned, as it reduces the perceived risk of buying a used car.

    Turn Time Factor #4: Pricing and inventory strategies

    The effectiveness of pricing strategy can make or break your inventory turn time. Pricing it too high can make it more challenging for your sales staff, whereas pricing it too low can eat into profit margins.

    This points to a larger need to align your pricing strategy with your purchasing decisions. Certain vehicles have different average turn times–for example, specialty vehicles like RVs generally take longer to sell than standard sedans and trucks

    Dealerships need to carefully consider their market positioning, inventory mix, and the broader economic environment to select the most effective pricing strategies that balance the need for competitive pricing, quick sales, and healthy profit margins. 

    Some of those pricing strategies include: 

    • Market-Competitive Pricing: Setting prices based on market prices of similar cars
    • One-Price Model: No-haggle pricing strategy where the dealer sets a fixed price for each vehicle 
    • Psychological Pricing: Pricing a car at $19,995 instead of $20,000
    • Dynamic Pricing: Adjusting based on market conditions, inventory levels, and demand 
    • High/Low Pricing: Initially listing vehicles at higher prices, then offering periodic discounts or promotions to create buyer urgency
    • Penetration Pricing: Setting prices lower than competitors to draw in buyers, ideally speeding up inventory turnover but potentially at the cost of reduced margins

    All of these options influence the inventory turn times at a dealership. Regardless of the approach, though, dealers may want to base these pricing decisions on up-to-date, relevant data. This should include geographical market info, industry publications, manufacturer suggested retail prices (MSRP), and internal customer data.

    Rev up inventory turn times with a dealer floor plan from AFC

    As you focus on shortening turn times, you’ll need to grow and do more with your inventory. That’s where a dealer floorplan from AFC comes in to help. Since 1987, AFC has been supporting independent dealers with innovative floorplan solutions that make auction purchases easier, take your inventory budget further, and help keep your cash flow in the business. 

    Ready to dial in your dealership’s inventory turn times and grow your sales? Start your application with AFC today for a smarter way to manage your inventory and grow your business.

    Disclaimer: Descriptions of AFC floorplans are for illustrative purposes only. Terms of AFC floorplan financing are subject to a final written agreement acceptable with AFC. AFC does not guarantee any results for floorplan financing and examples are for illustrative purposes only. Dealers should consult their own advisors to make independent business decisions regarding floorplan financing.

    “AFC” refers to Automotive Finance Corporation, Automotive Finance Canada Inc., and AFC Cal, LLC in their respective jurisdictions. All California transactions are through AFC Cal, LLC. California loans will be made pursuant to Department of Business Oversight California Finance Lenders License. Canadian transactions are through Automotive Finance Canada Inc.