Used Car Dealer Inventory Management Chicago Illinois

Updated July 15, 2015
Used Car Dealer Inventory Management Chicago Illinois
Inventory management in the used car dealership industry

This really doesn’t come down to valuation.

Inventory Management in the Used Car Dealership Industry in Chicago

If you open the lastest auction results catalog from Milwaukee, it should give you a decent idea what your inventory is worth. Used Car Dealer Inventory Management Chicago Illinois industry is where profits are made or lost.


Let’s illustrate this with an example. There are two things working against you. First, used cars generally go down in value, rather than up over time. We’ve certainly seen markets where this was not the case. The Cash for Clunkers Program certainly restricted supply substantially which increased prices. We also have the income tax refund market which pushes demand in the first part of the year. But generally, when you buy inventory it goes down in value, rather than up.


In addition, this money has a time value. Whether you used your own money to purchase the vehicle or you used conventional financing or a floor plan, the purchase money has a cost.


For our example lets assume three things. First that the vehicle cost after auction fees, transportation and set up is $15,000 and that in a good market you will be able to sell it for $16,800. Second, that the cost of capital is 10% annually. Third, that the value of the vehicle is going down $100 per week.


Here’s the point. If you hold on to the inventory too long, without either selling it or taking it back to the auction, you are naturally going to lose money.

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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.