What Is a Good Car & Van Stock Turnover Ratio?
A good dealership stock turnover ratio can depend on specific circumstances, including its size, location, market conditions & the types of vehicles it sells. However, these industry benchmarks can be a useful guide.
What Is the Stock Turnover Ratio?
It is how many times a dealership’s stock of vehicles is sold & replaced over a specific period, usually a year, it is calculated using the following formula:
Turnover Ratio = Cost of Goods Sold (COGS) / Average Total Stock Value
Industry Benchmarks
For both car & van dealerships, a typical inventory turnover ratio ranges between 8 to 12 a year or selling & replenishing your entire stock every 30 to 45 days.
What is considered a "good" turnover ratio?
This depends on a few factors, typically:
Type of Units Sold:
High-demand vehicles or popular models, have a higher turnover ratio as they sell quickly.
Niche or specialized car & vans have a lower turnover ratio due to slower sales but may be more profitable.
Market Conditions:
A strong economy with high demand for vehicles can drive up turnover ratios, but economic downturns or market saturation lead to lower turnover ratios.
Efficient stock Management
Aligning procurement closely with sales patterns helps in achieving higher turnover ratios & holding excess stock lowers the ratio & ties up cash unnecessarily.
Size & Scale of the Dealership
Larger dealerships with broader stock might have slightly lower turnover ratios than smaller specialist ones, who can react more quickly to changes in demand.
Targeting an Optimal Turnover Ratio
You should be aiming for a turnover ratio within the 8 to 12 range, higher turnover ratios suggest:
Efficient Sales:
The dealership is selling units quickly, minimising the time they stay in stock.
Effective Inventory Management:
Not overstocking, which helps in reducing holding costs & freeing up cash for other uses.
Strong Market Position:
You’re meeting market demand, which is a sign of good sales practices & customer demand alignment.
How to Improve
Strategies that can help:
Enhanced Marketing Efforts:
Targeted marketing campaigns to boost sales of specific models can help increase turnover.
Optimising Stock:
Regularly reviewing sales data to adjust the mix based on what is selling to avoid holding slow-moving units.
Flexible Pricing Strategies:
Promotions or adjusting prices to move stock more quickly.
Efficient Supply Chain Management:
Strengthening relationships with suppliers to ensure a steady flow of high-demand vehicles.
Customer Engagement:
Building strong relationships with fleet buyers & commercial customers can help you get repeat business can speed up stock turnover.
Conclusion
A turnover ratio within the range of 8 to 12 a year, is 2/3rds to 1 a month is solid benchmark. Regularly monitoring this number & reacting to changes in the market will help you maintain optimal stock levels & sales activity.
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