Keying In on Performance Indicators

Last Friday’s All Things Used Cars podcast was filled to the brim with used car key performance indicators (KPIs) that successful dealerships are keeping tabs on. Of course, there is no one-size-fits-all when it comes to these metrics, but here were what we learned many dealers are monitoring:

🔑 First 30 Days 

• Track: Watch your volume. Monitor 2-week sold percentages to anticipate upcoming inventory needs once there's been a month’s worth of sales. 

• Stats: Ideally, you want to be selling 60-70% of your used car inventory within the first 30 days of acquisition.

• Consider: If only 30-50% are going out in the first 30 days, why? This can lead you to troubleshoot where you may be falling behind (i.e. not enough promotion, behind on photos, not carrying inventory customers care about, pricing too high, etc.)

🔑 Leads By Segment and Model

• Track: Start with leads by segment — SUVs, sedans, trucks, etc. Then focus on leads by model. If you’re getting a lot of interest in large SUVs, you don’t want to fill your inventory with Infinity QXs if you’re actually selling a bunch of Sequoias.

• Stats: 70% of your active leads are on cars sold.

• Consider: Backfill your inventory with cars that you’re not just selling, but also have leads on (i.e. if you have a car that gives you 20 leads and you only have one of them, then you need to backfill your inventory for the other 19 customers). 

• Don’t forget to consider comps. Take an active lead on a Ford Explorer that sold, and introduce your customer to the lonely Jeep Cherokee that’s been hanging out at the back of your lot waiting for a chance to shine.

🔑 Acquisition and Cost to Market 

• Track: Cost to market = acquisition + reconditioning + transportation + maintenance. This KPI is critical because it enables the dealership to determine the profit margin on each unit.

• Stats: Private-party purchases direct from buyers have grown from 13% to 42% over the last few years. Due to limited inventory, the front and back grosses are almost 50-70% higher than any other acquisition source. In general, dealers will want to maintain a maximum 84% cost-to-market average for their overall used vehicle inventories. 

• Consider: Top performers embrace the balance between a vehicle’s desirability and its price. Cost-to-Market is just one of three critical metrics to improve profitability in your used vehicle operations – you’ve still got to find the “right” cars (e.g., Market Days Supply) and price them in a manner that assures their quick sale to maximize front-end gross and minimize age issues (e.g., Price to Market).