What Is Stock Turn And How Can It Be Improved?
11th March 2022
Stock Turn Explained
Dealer Management System and Car Dealer Website provider Dragon2000 examines why measuring Stock Turn and acting upon the results is an important area that car dealership businesses should be paying attention to.
Car dealers who are looking to increase their profitability this year retailing vehicles should definitely consider analysing their Stock Turn, and the benefits of taking steps to improve it.
What Is Stock Turn?
Used vehicle Stock Turn indicates how often a dealership can sell its vehicles over the course of a year. The quicker you can make a sale, the less money you need to invest and the more profit your car sales business can make.
Failing to control your Stock Turn could lead to profits fading away over time while costs increase, which is why dealers need to take the time to properly measure, understand and monitor their Stock Turn ratio.
How Car Dealers Can Calculate Stock Turn Ratio
Your Stock Turn ratio can be calculated using the following equation:
How To Improve Your Stock Turn Ratio
The common stock age policy for car dealers is 60-90 days, with stock turned ideally every 45 days to give you 8 Stock Turns a year.
Any vehicles failing to sell after 90 days should be sold back to trade and replaced with a car more likely to produce a sale. As you have capital tied up in overaged stock, coupled with it likely costing you stocking loan interest, replacing it with more saleable stock that can be turned around quicker can outweigh any losses incurred in disposing of these overaged vehicles at 90 days.
When it comes to clearing out stock, there’s a host of factors which could have contributed to the non-sale, including the time of year, so it’s worth keeping an eye on any industry trends to ensure that you’re only purchasing vehicles which are in demand.
Increasing your sales without adding more vehicles to the forecourt is an easy way of improving your Stock Turn ratio, while another solution is to reduce the amount of stock you’re bringing in.
The DragonDMS dealer management system allows you to easily calculate your Stock Turn ratio, with instant access to essential vehicle information, including days in stock, readily available. Monitoring your dealership’s Stock Turn ratio throughout the year will provide you with an insight into the accuracy of your product planning and stock control, giving you the chance to make changes to increase profits.
Dragon2000 have been helping dealers and garages drive their businesses forward since 1995. Talk to our team today on 01327 222 333 or email email@example.com to find out how our dealer management system, car dealer websites and mobile apps can help your business increase profits and reduce costs.