I was speaking with a GM of a large franchise store yesterday and he was telling me that sales are up and cars are bringing premiums at dealer auction. He went on to say that his total wholesale losses have decreased significantly overall, but the dealership still inccurs thousands in depreciation losses every month.
So, I asked "what about gas prices"? He replied, yeah. We are having trouble moving our SUV inventory and even while overall auction prices are up, prices for fuel-sucking vehicles are actually down. What does this mean? Simple, if you use dollar-cost-averaging across his entire wholesale inventory, you will find that the money he's generating on clean late model, fuel-efficient vehicles is diminished by the lower prices brought at auction on the trucks and SUVs.
The moral of this story is: Markets are cyclical in nature, and although dealers are having success from one area of their business, chances are they may be suffering from hidden costs and depreciation associated with off-makes, odd-inventory and low margin trades.
John "Derek" White
EDrive Autos, LLC
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