I have a friend in the real estate business and he told me that if I was waiting for the price of land to come down that it would be a long wait. So far, he has been correct but let’s not forget that he is in the business of selling.
The value of land increases along with supply and demand forces that are at work around it. Many investors have correctly predicted the expansion and growth of a commercial or residential area and have done well at selling time.
Land is very well laid out for all to see. Sometimes there are changes but essentially what you see at a specific location today is a lot like you will see after the passage of time. Some wines age gracefully and become more valuable. Not so much with beer. Another associate of mine who was invested in a beverage company explained the value that the brewer (manufacturer) realizes from placing a prominent date upon their product. We believe it is for the determination of freshness and it is, but it also reminds the seller of the age of the product.
I have purchased many vehicles and have never done so with the intent of creating an outflow of cash that would exist long enough to erode the expected return or economic value that I was looking for at the time of purchase.
Inventory is dollars. It is cash. It is beer. When it loses freshness, it must be poured- out. Only a desperate and thirsty customer would drink an old beer or buy an over-age and problematic vehicle. I know that there are dealers who have sold an Orange Gremlin that sat on the lot for 182 days and surprisingly enough even signed off on the title when the loan paid out.
But let’s not talk about the one time in a 25- year career event. Should we not examine the fortunes which result from the more effective and reasonable management of vehicle inventory? Whenever I spend time consulting with a dealer I first discuss inventory.
The vehicle purchase is occasionally the problem. Buyers sometimes make mistakes or fail to recognize well disguised defects which become apparent after the fact. The first loss is the best loss. Managers receive vehicles into inventory that are certified or that have passed inspection but in the most efficient system that I ever operated we gave the manager a great tool. The right to rescind the deal.
If a dealership manager evaluated a vehicle which was assigned to or purchased by the store with a valid and documented reason for disposal then we took it back. It became a buyer or management problem rather than an eventual cost or customer problem. Trust me, the loss or breakeven was a great investment and helped avoid numerous other possible issues.
In a recent study of multiple web sites from dealer prospects I focused on the issues which involved customers rating the dealership. Overwhelmingly, the results were always the same. If a customer was happy with their vehicle they might offer to write a positive review. I will assure you that a customer with a broken car can be very vulgar and disparaging to you and your business and that they will write a negative review.
Managers can force the issue on vehicles which lack in operation, appearance and cost if they have the proper tools. First, they must realize that expenses when extended outside of policy boundaries will not fix the problem. Appearance or cosmetic issues can be just as damaging especially if the price is not modified or adjusted. Vehicles that do not operate satisfactorily during testing will not serve well if sold and passing problems on to customers is contractual suicide.
The cost of land seems to be ever-increasing even if the grass isn’t mowed or improvements are not made. Vehicles depreciate when being operated or when sitting in your inventory and the reasons are many. Inventory management is a specialty that we teach. From acquisition, inspection, re-conditioning and merchandising as well as dealing with warranty and issues after the sale. We are here to help with training and operations.
After all, we like the real estate agent are in the business of selling and time stands still for no one.
-Mike Eskina, July 20th, 2018