Resource Center - Industry Articles
Choosing the Right Inventory
by Joel Kennedy , March 18 2010
So, you are an independent dealer who is really on the ball. You know your customers and their needs. You have solid relationships with lenders that consistently meet the needs of your customers. All you really have to worry about is making sure you have the right car at the right time.
You also know, however, that staying abreast of changes in your customer base and lender programs is an important piece of the puzzle when it comes to staying on top. Choosing the right inventory is something that requires that you know your customers and that your lender programs line up well with your customers' credit and collateral needs. With these two pieces in place (customers, lenders), choosing the right inventory can be simple. Here are some ways to make sure that you are staying on top of all three at all times:
Go through your recent approvals.
By going through your recent approvals on a monthly basis, you can get an indication of how well your customers and lenders are matching up:
What customer trends emerge? What are the average FICO, income, down payment, and other credit quality indicators? What collateral trends emerge? Try to get a handle on the range of collateral that your customers are buying and your lenders are supporting. What are the minimum and maximum values that you see for model year and mileage?
Go through your recent declines.
Now that you have gone through your recent approvals, you know what types of cars your customers are getting approved for by your lenders. But what about the cars that your customers want, but can't get because they lack lender support? Just like going through approvals, this exercise should be performed on a monthly basis.
What are the common turn-down reasons? Drill in on declines based on credit reasons and declines based on deal structures that fell apart.
How well are your lenders aligned with your customers? Are there lenders out there that may be a better fit for your customers?
Are you seeing "wrong collateral" or "change collateral" as a common turn-down reason? Refer to your lender's most recent program sheets for makes/models that are no longer supported.
Once you have gone through the above exercises, you will know what makes, models, max mileage, and max vehicle age that your customers and lenders are agreeing upon. This information should help you and your auction buyer to select the right inventory. It should also help you to strategize which customer trades to keep and which to retail out. Keeping on top of your most recent customer purchases on a frequent basis will help you to grow your business, improve efficiencies, and turn your inventory faster.
"Reprinted with permission from Dealer Marketing Magazine". Joel Kennedy is EVP/COO and co-founder of Pelican Resource Group, LLC (www.pelicanresourcegroup.com), an innovative lending and servicing partner, currently operating in the Mid-Atlantic region. For more information please call 866-989-9688 x702.
