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Stock Turn Ratio Calculation Simplified

 

Stock Turn Ratio Calculation

Stock Turn can be a complex Motor Trade Key Performance Indicator (KPI) to grasp, but it is one that is critical to a dealer’s operational performance.

What Is Stock Turn Ratio?

Careful stock control is one of the most important aspects for any used car dealer to focus on. Ignoring the stock turn ratio could lead to a dealer’s profits fading away, and as time goes on, costs becoming bigger whilst profits become smaller.

In simple terms, Stock Turn is the amount of times per year that the same money is used to buy another car.

How Stock Turn Works

As a general rule, the quicker that the dealer turns over their stock, the less money they will need to invest, and the more profit they will make.

How To Calculate the Stock Turn Ratio

A dealer can calculate their Stock Turn ratio by taking the annual used car retail sales (the number of used cars that they have sold in one year) and dividing this by the number of used cars the dealer currently has in stock.

For example, if today a dealer has 82 used cars in stock, and in the past 12 months they have sold 950 used cars, their stock turn calculation would be:

950 ÷ 82 = 11.6

This would mean that the dealer’s stock will have turned over 11.6 times in one year, which is an acceptable stock turn. Dealers should be aiming to turn over their stock at least 8 times per year.

How To Achieve A Good Stock Turn Ratio

Ideally, a good stock age policy is 60 – 90 days. If a vehicle is not sold within 90 days of the purchase date to a retail customer, the best course of action is to sell it back to trade and replace it with something else that will sell. There are a few other ways that dealers can to improve their Stock Turn ratio:

  • Increase sales without increasing your stock levels
  • Decrease your stocks without interfering with sales
  • Increase sales and at the same time, reduce your stock levels

Stock Turn Calculation Using Our Dealer Management System

Users of our Dealer Management System, DragonDMS, can easily work out their Stock Turn ratio as they have quick and easy access to the information required for the calculation.

Dealers need to know and keep track of their business’s Stock Turn ratio to maintain an accurate view of the effectiveness of their product planning and stock control.

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