Take a second to imagine this scenario: you and I are working together, and I ask you early-on in the consultation phase, “Where do you think the greatest area of opportunity in your used-car department exists, and how can I help you capitalize on that opportunity?”

Think about what your answer might be, for your specific dealership. If you are anything like the overwhelming majority of people, you would ask me to help you get more inventory.

A little later on in this article, I will give you some recommendations on how to secure more inventory, but first, let’s dig a little deeper into the concept of “getting more inventory”, and what that means.

A lot of dealers believe that volume is the single key to profitability. However, I like to believe you first become profitable, and then try to increase volume, in order to further increase profit. Unfortunately, we often justify low (or non-existent) profits by placing the blame on factors that appear to be out of our control.

For example, you might find yourself saying, “at ABC Motors, our break-even target volume number is 53 cars per month, but we are averaging 41 cars per month. If we could just find 12 more cars per month we’d be making money, but there are just no good cars out there. Oh well. Wholesale inventory should increase in 2015, and until then we will just keep trying our best.”

What starts off as a barrier, then becomes a reason, and then turns into an excuse. The whole cycle continuously repeats itself.

On any given day, there are hundreds (if not thousands) of cars available for sale exclusively for registered dealers in Canada, and thousands (if not tens of thousands) available in North America.

“Yeah, but Richard, those cars are no good – they’re overpriced, and most have accidents. Heck, they pay more wholesale for those cars than I can retail them for.” The barrier, reason, excuse cycle begins.

So getting more inventory isn’t really want you want — you want high quality, low risk, quick turn and great gross profit inventory. You also want this inventory to arrive at your door without devoting time or resources to it, and without having a plan of attack on how to get it there.

Cars that are easy to acquire always come with a price. I like to call those “convenience cars,” and daily rentals are at the top of the list of convenience Cars. Generally speaking, daily rentals require minimal service reconditioning, are still under factory warranty, have low payments through long finance terms, and — the best part is — they give you a list with prices, and you just pick the ones you want, so you can avoid the auction. Pretty convenient, but wait, what’s the catch? The catch is the same as it is when you buy a big bag of chips at the convenience store, instead of at the grocery store. The exact same Bag of chips will cost you $4.99 instead of $2.99. You pay for the convenience. Daily rentals do not have the market cornered on convenience, as there are many companies and businesses that cater to making it easy for you. Just remember, convenience always comes at a cost.

So how do you acquire better inventory? The first place I would suggest you look to increase your inventory is through the front door of your dealership. Do you have a solid trade appraisal process that is followed every time? Do you know what your look-to- book is? Do you spend time training staff on how to explain to a customer the true value of their trade? Do you try and retail every trade-in aside from true clunkers? Do you pay more for a trade-in than you would pay at auction? If you answered “no” to any of those questions, then you have a starting point.

Maximize all potential opportunities through trade-ins before searching elsewhere, as trade-in vehicles will not only be your best value, but they are also the easiest to acquire; they hold the least amount of competition, and they create added value and profit to other departments of the dealership.

After your trade-in opportunities are at capacity, and you still require more inventory, then it is time to look at your manufacturer’s closed auction. Create a systematic (almost science-like) plan for how to secure vehicles. This requires Dedication, discipline and a lot of time. The overall goal should be to not allow a single vehicle to go through the closed auction without having had an evaluation done by you. It is not realistic to think that you can randomly attend auctions, expect to buy a bunch of cars and then be profitable. That all sounds a little too convenient, and we know what convenience costs. Having said that, most dealers, with the help of inventory management Software, understand that the prices some people pay at auction sometimes exceeds the retail value of the vehicle. This is why it is important to have a systematic plan, along with a schedule, and the dedication and discipline to follow through with that plan and schedule.

Once you have maximized your use of your manufacturer’s closed auction, then you can take your system and discipline, and enter the open market, where there are hundreds to thousands of cars and hundreds of dealers are all looking for the “right” inventory. This can also be the time you choose to look at third-party brokers, whether online or in person, to add convenient inventory in order to increase overall profitability.

A great quote from Thomas Edison comes to mind when I think about acquisition – “Opportunity is missed by most people because it is dressed in overalls and looks like work.” Remember, it all starts with you.

Richard Macdonald is the founder of RPM Solutions. Richard provides consulting, training and coaching services to new-car franchise stores to help them maximize their used-car department profits. For more information, contact Richard at 416-894-1475 or richard@rpmsolutions.ca, or visit www.rpmsolutions.ca.