Workshop 2011_Investing in the complex used car cycle

WORKSHOP OPERATIONAL LEASE
COMPANIES

Improving cash flow and results through the
management of the april 5 2011
Vienna,
entire “used car” cycle
th

Sales consulting with strong focus
on automotive

Nicolas Martel Optimization of sales organizations

 Implementation of used car
programs

 Sales management outsourcing

Please do not redistribute this document designed
only to be a visual guide to the presentation.

Cash flow: key factor of used car operations

The basic “used car cycle”

Breaking down the basic “used car cycle”

Investing the complex “used car cycle”

Q&A


Many small operators look at
sales margin more than their
stock rotation

Sales margin being:

(sale price of car + sale of
ancilliary items)
–
(cost of purchase + cost of
preparation + direct sales costs)


The sales margin is only part of
the equation of a profitable used
car business activity


Used cars are perishable items

Average depreciation: 20% year
on year

Regular arrival of “fresher”
models

Immobilized cash is not free


Financial immobilization of
capital is strong:

Cost of capital: 0,5% per month
(50€ per month/car with
average price 10 000€)


Depreciation and cost of capital
are also only part of the
equation of a profitable used car
business


Stock rotation means a better “return on capital”

Purchase price: 7 000 €

Selling price: 10 000 €

Sales margin: 3 000 €



EXAMPLE 1: 45 DAYS

Day 1 Purchase price: 7 000 €

Day 45 Selling price: 10 000 €


Investment return: 42% in 45 days

Yearly sales margin: 24 000 €

Yearly investment return: 342%



EXAMPLE 2: 30 DAYS

Day 1 Purchase price: 7 000 €

Day 30 Selling price: 10 000 €


Investment return: 42% in 30 days

Yearly sales margin: 36 000 €

Yearly investment return: 514%


 15 days difference in the rotation of the
used vehicle:
◦ 12 000 € more revenue per year from the same
invested amount of 7 000 €
◦ Each day of faster rotation brings back 800 € of
revenue
 With equivalent fixed costs
◦ Storage
◦ Sales team
◦ Cost of capital


With a higher monthly volume, these amounts can
be extremely significant.

Fast rotation of the vehicles enables the same
amount of cash to be invested in MORE
potentially profitable transactions.


“Purchased” INTERNAL PROCESS Sold

The “family” recipe is
the key between 45
days and 30 days

Cash out Cash in


 When we think of the “family recipe”, we think
a lot about getting sales out fast.
◦ We always should assess our capacity to sell as fast
as possible

 But getting sales out faster and faster may
also decrease margin and generate higher
advertising costs:
◦ More promotions
◦ More advertising


“Purchased” Sold

INTERNAL PROCESS

Time for the car to be sold…


“Purchased” Sold

INTERNAL PROCESS

Time to make Time for the car
the car ready to be sold…
for the sale…


INTERNAL PROCESS

Time to make the car Time for the car
ready for the sale… to be sold…

- Administrative management - Advertisement and
marketing
- Assessment of vehicle
- Phoning contacts
- Cleaning / Repairing
- Price negotiation
- Fixation of price
- Sales administration
- Providing information to (leasing, invoicing, verification
sales of payment)

-Getting the car physically to
the selling point


 A high stock rotation is not just a question of
“hard selling”

◦ It is also a question of internal organization

Orientation target for a new / used car dealer: 10 days from purchase
to ready to sell INCLUDING repairs and mechanical control


 Food for thought

◦ What are the bottlenecks in my organization?

 Known AND unknown

◦ What is the origin of these bottlenecks?

◦ How much do these bottlenecks cost?

 In terms of cost of capital
 In terms of vehicle depreciation
 In term of lost opportunities


INTERNAL PROCESS
Later… Soon… Now… SALE

These These These
vehicles are vehicles will vehicles are
known, but be part of the
their sale is purchased basic “used
distant back soon car” cycle


 One key word: tracibility

◦ I know what is coming

◦ I prepare the work

◦ I plan for eventual difficulties

◦ I shorten the basic “used car” cycle


INTERNAL PROCESS
Later… Soon… Now… SALE

I measure the I seek out I work with
future means potential the most
for selling buyers for effective
these these means for
vehicles vehicles getting
vehicles out
of stock fast


 Tools available for investing in the complex used
car cycle

◦ Software with vehicle status

◦ Time goals and monitoring
 Administrative processing
 Vehicle estimation
 Vehicle preparation
 Vehicle merchandising

◦ Sale goals


 One main idea

◦ Preparing all the team for future sales:

 Everyone has a role to play

 No “walls” between vehicle administrative
management and vehicle remarketing

 The sale of the used vehicle starts right after its first
registration


Q&A


Workshop 2011_Investing in the complex used car cycle

Workshop 2011_Investing in the complex used car cycle

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