13 Aug

Acquiring quality inventory for your Buy Here – Pay Here or Lease Here – Pay Here dealership will be one of your most difficult tasks as an owner. Make no mistake about it, it can be easy to buy cars to fill up your lot but getting quality vehicles that will sell quickly and run the length of the loan or lease requires patience and organization. Here are a few tips on where to find vehicles.

The public is the original source of all used vehicles. They are the best source of inventory although buying strictly from private parties will not produce sufficient quantity of vehicles to keep your lot stocked. It is advisable to have the employees regularly review the automotive classified ads in the newspaper. Your dealership should maintain an ad in the classifieds advertising that you purchase vehicles. A vehicle purchased from the public is being used every day by the seller; therefore, you will know the history of the vehicle and repair invoices can often be obtained.

Car dealerships are the next best source for vehicles because they can provide a steady stream of inventory at reasonable prices. Most of the vehicles from franchise and independent dealerships will be local trade-ins. Since most dealers clean out there excess older inventory every week or two, it is likely these vehicles were being driven regularly within that time period. In the past, most new car dealers did not want to sell the types of vehicles we want for a Dealer Controlled Financing operation. Today, more new car dealers are keeping these vehicles and retailing some of these units to improve their used vehicle sales; however, there are still dealers who have not chosen to go down this road and they are an excellent source of inventory. Since there is no competition for the same customer, there is no reason for them not to sell to your DCF dealership. This reveals one drawback to having a DCF operation housed in a new car dealership. Other new car dealers are not as likely to sell vehicles to another new car dealer as they are to a DCF lot. If your DCF lot is on the same site as a new car store, this problem can be overcome by soliciting new car dealers in non-competing markets.

Wholesalers are the next most popular source of inventory. It is recommended that you build and maintain a relationship with a few reliable wholesalers. If the lot can show a hard working wholesaler that it will be a steady buyer, that wholesaler will find better vehicles specifically for you. As a warning, title issues may increase with the use of wholesalers.  Also, a vehicle from a wholesaler may have sat on a new car dealer’s lot for a week or two before the wholesaler purchased it and then sat at the wholesaler’s lot prior to being sold to you so the length of time since the vehicle was regularly driven is longer.

There are many other sources of inventory available. Depending on the region of the country the dealership is located in, there are probably many more sources than those listed below. This list contains some of the more common sources of inventory available. It is intended to be a starting point; be creative and add to it.

  • Estate sales
  • Local finance companies, banks, and credit unions
  • Legal notice section of local newspapers
  • Classified section of local newspapers (Also, in the local newspaper classified section, advertise that your dealership buys vehicles.)
  • Rental vehicle agencies
  • Private party vehicles displayed in local parking lots
  • Companies with fleets of vehicles

It is recommended that purchasing vehicles for your inventory from auctions be a last resort. The buyer for the dealership must be more experienced when purchasing from the auction. There is a greater chance that a vehicle purchased from an auction has undisclosed hidden defects. Also, these vehicles come from two primary sources – car dealers and wholesalers. The vehicles that come from the wholesalers were probably purchased from a dealership and placed on consignment at the auction. The auction wants to make a profit, the dealer wants to make a profit when he sells vehicles to a wholesaler or at the auction and the wholesaler wants to make a profit. Why buy inventory that is marked up two or three times? Go to the source and save money. The time since the vehicle was regularly driven by an owner may be months for a vehicle purchased at the auction. It may have sat at the new car dealership for 1-2 weeks, at the wholesalers for 2-3 weeks or longer while he got it ready for the auction and it may have been at the auction for 1-2 weeks if it didn’t sell the first time it ran.

Repossession as a source of inventory is a dangerous concept. The true costs of repossession are staggering. If you believe a high repossession rate is acceptable because the vehicles can be resold, think about the true costs of those repossessions; the labor costs you incurred in the collection and repossession process, the loss of a customer who may have purchased more vehicles, and the unpredictable legal expenses. It is also likely the customer whose vehicle you repossessed will make statements to friends and relatives that may cost you additional sales opportunities. That is why we say to repossess the customer, not the vehicle.