Imagine this: A customer walks into your dealership, ready to buy their dream car. They’re excited, credit-approved, and eager to seal the deal. But there’s a hitch — the vehicle they want isn’t on your lot. Instead of closing the sale, you’re left scrambling to locate the car, or worse: watching the customer head to your competitor.
This scenario is all too common for dealerships struggling with poor inventory management. Without the right system in place, you risk losing sales, tying up valuable cash in slow-moving vehicles or missing out on high-demand models.
With effective dealership inventory management, this doesn’t have to be your reality. By implementing the right tools and strategies, you can keep your lot stocked with the vehicles your customers want, reduce overstock, and improve your bottom line.
Dealership inventory management: An overview
Dealership inventory management is all about keeping the right vehicles on your lot to meet customer demand while staying profitable. It ensures you have the right mix of new cars, used cars, and trade-ins ready for eager buyers.
At its core, car dealership inventory management is about balance. You don’t want to tie up cash in slow-moving stock, but you also can’t afford to lose sales because you’re out of high-demand models.
That’s where tools like inventory management systems or a dealer management system (DMS) come into play. These systems give you real-time visibility into your automotive inventory, helping you track what’s selling, what’s not, and what to prioritize.
Effective automotive inventory management means:
- Keeping tabs on the vehicle identification number (VIN) of every car.
- Managing off-lot inventory, like vehicles awaiting reconditioning or in a storage lot.
- Using inventory management software to predict market demand and guide smarter purchasing.
- Streamlining processes like appraisals, trade-ins, and vehicle pricing to maximize profitability.
When done right, dealership inventory management determines how efficient and profitable your business is. It helps you avoid overstocking, limits frustrating customer experiences, and ensures you always know what’s available. From updating window stickers to managing purchase orders, every detail matters to create a smooth experience for your customers and your team.
The importance of good dealership inventory management
Whether you’re running a small car dealership or a large franchise, how you manage your automotive inventory makes or breaks your business. Here are some key benefits of having a strong inventory management system.
Boosted profitability
When your inventory is well-managed, you avoid investing in vehicles that aren’t in demand. Instead, you focus on stocking the high-demand makes and models that will sell quickly, increasing your turnover ratio and profit margins. Using inventory management software and VIN tracking also helps fine-tune your pricing strategy by giving you access to real-time data on each vehicle’s age, demand trends, and market value. This allows you to set competitive prices and ensure you’re maximizing profits while exceeding customer expectations.
Improved cash flow
Good inventory management helps you better allocate resources. By keeping an eye on car inventory levels, you’ll avoid over-purchasing and free up cash to spend on other important areas of the business — reconditioning, marketing, or expanding. You’ll also prevent tying up funds in slow-moving stock, allowing for a healthier cash flow.
Happier customers
No one likes to hear that the car they came to buy is out of stock. With a well-organized car dealership inventory management system, you will keep your lot stocked with the right mix of new and used vehicles to meet customer demand. This means faster sales and more satisfied buyers, which leads to repeat business and positive reviews.
Streamlined operations
Efficient inventory management helps you streamline every step of the process. From handling trade-ins and acquisitions to processing purchase orders and managing vehicle pricing, having the right system makes it easier to keep everything running smoothly.
Plus, integrating your inventory management system with other tools, like CRM platforms, accounting software, and dealer websites, allows for real-time updates and better communication across your team.
Lower risk of loss
Vehicles that sit around too long lose value, and that’s money down the drain. Staying on top of your auto inventory and adjusting to shifts in market demand minimizes the odds that you’re holding onto slow-moving stock and facing depreciation.
Also, having a clear strategy for liquidation, like auctions and offloading to wholesalers, reduces the risk of inventory loss and maintains profitability.
12 best practices for effective dealership inventory management
Getting your car dealership inventory management right means more sales, happier customers, and a healthier business. Here are 12 dealership best practices to help you master inventory management and keep operations running smoothly.
1. Conduct regular inventory audits
Regular inventory audits are essential for keeping your stock in check. Whether you’re using an automated inventory management system or doing manual counts, consistent audits help spot discrepancies early, allowing you to address any issues with your automobile inventory before they become bigger problems. This also ensures that your auto dealer records are current and you’re always aware of what’s on your lot.
2. Utilize inventory management software
Inventory management software makes tracking your dealership inventory a lot easier. It helps you stay on top of new vehicles and used car inventory, making sure you’re always up to date on inventory levels. This way, you can quickly adjust pricing strategies and avoid costly mistakes.
With the right system, you can even connect your dealer management system (DMS) and CRM, giving you a complete picture of your stock. It makes managing trade-ins, purchase orders, and vehicle pricing smoother.
3. Analyze sales data
Sales data shows you which cars — both new vehicles and used car inventory — are flying off the lot and which are gathering dust. Keeping an eye on trends can help you stock up on high-demand makes and models while avoiding overstock of slower sellers. For instance, spotting a surge in interest for SUVs could help you adjust your inventory acquisition strategy before the competition catches on. This approach not only aligns your stock with market demand but also keeps the dealership profitable and customers happy.
4. Set reorder points
Setting reorder points for each vehicle is essential, especially considering the unique nature of car dealerships. Unlike typical retail inventory, vehicles often come with contracts, commissions, and financing arrangements. By knowing when to reorder based on demand and sales, you can keep your lot stocked without overcommitting funds.
5. Forecast demand
Accurate demand forecasting is one of the most effective ways to stay ahead of competitors in the dealership world. Pay attention to local market conditions, industry trends, and economic factors to predict which vehicles will be in high demand. This limits excess auto inventory or understocked cars.
6. Optimize inventory turnover
Optimizing inventory turnover means getting vehicles off your lot quickly, reducing depreciation and freeing up cash to reinvest in new stock. To achieve this, focus on pricing strategy and use inventory management systems to monitor how long vehicles sit before being sold to make sure inventory is moving efficiently.
7. Implement Just-in-Time (JIT) inventory
The Just-in-Time (JIT) inventory system, popularized by Toyota, focuses on ordering vehicles based on real-time demand rather than stocking excessive inventory. For dealerships, this means aligning vehicle orders with customer preferences and sales trends, so you’re stocking cars that are likely to sell. Instead of keeping a large, costly inventory, you only maintain vehicles that are in high demand or pre-ordered by customers.
This approach minimizes holding costs, reduces waste, and ensures a steady flow of vehicles from manufacturers or auctions to your lot.
8. Negotiate with suppliers
Negotiating with suppliers is key to maintaining healthy profit margins. For new car dealerships, the negotiation process may involve working directly with car manufacturers to manage volume commitments and negotiate pricing. For used car dealerships, negotiating at auctions or with wholesale dealers may be a more frequent part of the process.
Strong relationships with suppliers can also ensure you’re getting the best deals and priority on high-demand vehicles.
9. Categorize inventory
To track your inventory, it’s important to categorize vehicles effectively. Grouping vehicles by make, model, condition, or price range makes it easier to track trends, manage stock levels, and identify which segments need more attention.
Does a certain make from a particular year never sell? Are used cars turning over faster than new cars? Will you lose more storing high-end cars than you will gain by selling them? Identify these patterns and more by tracking data across categories.
Fishbowl Advanced makes this easy with custom reports, which you can filter by any attribute assigned to inventory.
10. Use barcode tracking
Implementing barcode scanners on everything from vehicle components to used car inventory allows quick checks and accurate tracking. This reduces human error and speeds up the process of managing and locating parts or vehicles, ensuring a smoother experience for your team and customers.
11. Train staff
Your staff plays a pivotal role in dealership inventory management. Ensure your team is well-trained in handling inventory and your management techniques, including using barcode tracking for parts or VIN scanning. Knowledgeable employees who understand inventory systems reduce errors in inputs, improve customer service, and enhance efficiency.
12. Monitor inventory aging
Use inventory aging reports — like the ones generated by Fishbowl — to track how long vehicles sit on the lot. These reports provide key details like part numbers, descriptions, and quantities, plus the number of days each vehicle has been in stock. Spotting slow-moving inventory early gives you a chance to adjust pricing strategies or liquidate vehicles before they become a financial burden.
Optimize your dealership’s inventory management with Fishbowl
Managing your dealership’s inventory doesn’t have to be complicated. With Fishbowl, you get a seamless integration with QuickBooks that lets you track inventory and finances in one place. From reducing overstock and identifying aging inventory to ensuring the right vehicles are always on hand, Fishbowl helps you improve profitability and keep your customers happy.
Ready to transform your dealership? Book a demo today and see how Fishbowl can help your dealership thrive!
