Building Resilient Dealership Operations and Inventory in a Volatile Market

Building Resilient Dealership Operations and Inventory in a Volatile Market

A man wearing glasses and a blue suit smiles in front of a window with greenery visible outside, embodying the spirit of Steering Success at NIADA.

Joe Keadle
SVP of Sales & Marketing

Last Updated 1/14/26

Logo for Kinetic Advantage featuring a stylized K symbol in gradient colors, followed by the words KINETIC ADVANTAGE in bold, modern font.

What Makes Today’s Market Volatile?

Interest Rate Swings

Dealer financing costs remain unpredictable as the Fed signals potential long-term rate stability but market reactions vary.

Price Fluctuations

Wholesale values climbed in April, then softened in May – a sign of volatility driven by seasons and supply factors.

Tight Vehicle Supply

Used inventory levels remain below pre-pandemic norms, putting pressure on acquisition prices.

Consumer Pressure/Confidence

While wages are growing, inflation outpaced them from 2020-2024, impacting buyer affordability.

Three Areas of Focus

It’s a Fiercely Competitive Market
(not in your control)

Internal Measures You Can Take to Maximize Profitability
(in your control)

Bringing it All Together
(How do your dealership numbers stack up?)

A red GIADA car drives on a two-lane road surrounded by lush green hills and trees under a partly cloudy blue sky, confidently steering success along its scenic journey.
What is going on in the market?
Line graph showing the resilient U.S. civilian unemployment rate rising from 3.9% in Q1 2024 to 4.4% in Q3 2025, with fluctuations between 4.1% and 4.2% in intervening quarters.

Civilian Unemployment Rate https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm

Wholesale Used-Vehicle Prices Increase in the First Half of December

Up 0.7% since December 2024

Manheim Used Vehicle Value Index (MUVVI) increased to 206.0, reflecting a 0.3% increase in wholesale used-vehicle prices (adjusted for mix, mileage, and seasonality) in the first 15 days of December compared to November, and a 0.6% increase compared to December 2024. Seasonally adjusted wholesale values typically show no change over the full month on average.

Non-adjusted wholesale vehicle prices fell 0.2% in the first half of December from November and are up 0.7% year over year. The long-term average monthly move in non-adjusted values is typically an increase of 0.3% for the full month of December.

Line graph showing the resilient Manheim Used Vehicle Value Index from January 2015 to December 2025, peaking in 2022 before ending at 206.0 in December 2025, reflecting changing inventory and market dynamics.
Used Loan Attribute Summary

Consumers’ anticipation of being rejected for auto finance at highest level ever. In fact, data from the New York Fed indicated the average perceived probability of a rejection of an auto-finance application reached 33.5%, the highest level since the start of the series 15 years ago.

Source: Experian, Most Recent Data as of December 2025

Line graph showing the average used loan term from 2021 to 2025, highlighting resilient trends as terms increase from 66.07 months in 2021 to 67.43 months in 2025.
Line graph showing average used loan rates rising from 8.48% in 2021 to 11.86% in 2024, then slightly decreasing to 11.40% in 2025—highlighting the need for operational resilience amid changing financial trends.
Line graph shows average used car monthly payments from 2021 ($440) to 2025 ($532), highlighting how effective inventory management and resilient ops helped stabilize payments around $524-$532 after a peak of $538 in 2023.
Line graph showing the average used amount financed from 2021 to 2025, highlighting resilient ops as it peaks at $27,908 in 2022 before stabilizing around $26,000 in subsequent years—a reflection of steady inventory trends.
Bar chart showing used auto loan risk distribution from 2020 to 2024, highlighting decreases in Subprime and Deep Subprime loan percentages from 30.81% in 2020 to 24.05% in 2024—demonstrating more resilient ops across dealer inventory.

Acquiring Inventory at the Right Price

Why it Matters
  • Rising wholesale prices compress margins
  • Tighter access to quality inventory
  • Paying too much = aged units = lost profit
The Inventory Pricing Trap
Inverted funnel diagram with three sections: Steering Success and Reconditioning to FLR at the top, Slow Turn in the middle, and Lost Revenue at the bottom.

Used Supply

Tight used vehicle supply trends support higher prices

Source: J.D. Power

Rethinking Your Inventory Mix

A 2x2 matrix with axes labeled Gross Profit and Turn Speed divides strategies—Experiment, Stock More, Don’t Stock, and Gain a Customer—providing a Steering Success framework for the automotive industry and NIADA members.

Three Areas of Focus

It’s a Fiercely Competitive Market
(not in your control)

Internal Measures You Can Take to Maximize Profitability
(in your control)

Bringing it All Together
(How do your dealership numbers stack up?)

How Do I Know if My Dealership is Profitable?

What are the metrics you need to use to determine if your business is profitable?

Line graph icon showing a downward trend with a dollar sign, indicating a decrease in inventory value or revenue.

Lost Revenue

Outline of a hand facing up with two coins marked with dollar signs hovering above the palm, symbolizing payment or inventory management for resilient ops.

Holding Costs

A simple graph with two intersecting curved lines, one solid and one dashed, meeting at a central point on an x-y axis—illustrating resilient ops and shifts in inventory management.

Break Even

Lost Revenue

What is it?

  • Lost revenue on aged inventory.
  • Aged inventory that doesn’t meet the dealership’s average turn-time.

How is it calculated?

Potential Sales
Age of Inventory / Average Turn-time

Potential Earnings
Potential Sales × Average Gross Profit per Unit

Lost Revenue
Number of Units (Aged Inventory) × $ Potential Earnings

A row of parked cars in a dealer-owned inventory parking lot, viewed from the side, showing multiple vehicle models lined up closely together.
Solid blue right-pointing arrow on a transparent background, ideal for illustrating navigation to ACV Auto Auctions or highlighting features in an ACV review about trusted auto auctions.

EXAMPLE

Inventory:
10 units at 180 days

Turn-time:
60-days

Average gross profit:
$2,225/unit

POTENTIAL SALES
Age of inventory / Average turn-time
180 days / 60-day turn-time = 3 units

POTENTIAL EARNINGS
Potential sales × Average gross profit per unit
3 units × $2,225 = $6,675

LOST REVENUE
Aged inventory × $ Potential earnings
10 units × $6,675 = $66,750

Average Daily Holding Costs

Selling Expenses
Expenses usually not absorbed by the buyer

Advertising, commissions, and salaries can be grouped into one GIADA Payroll category if the financial statement is not defined, Steering Success in streamlined reporting.

Average Daily Holding Costs

What is it?

  • Holding costs are those associated with unsold inventory.
  • First, you must understand your monthly holding costs before defining average daily holding costs per unit.

How is it calculated?

Monthly Holding Costs
Total monthly expenses – selling expenses

Monthly Holding Costs per Unit
Monthly holding costs / units in stock

Daily Holding Costs
Monthly holding costs per unit / # of selling days in the month

Modern office desk with a computer monitor displaying car trading data, a laptop, phone, and chair, set against a large window overlooking a cityscape with a tall, twisted skyscraper.
Solid blue right-pointing arrow on a transparent background, ideal for illustrating navigation to ACV Auto Auctions or highlighting features in an ACV review about trusted auto auctions.

EXAMPLE

Total monthly expenses:
$50,000

Selling expenses:
$21,000

Units on the lot:
30 units

MONTHLY HOLDING COSTS
Total monthly expenses – Selling expenses
$50,000 – $21,000 = $29,000

MONTHLY HOLDING COSTS / UNIT
Monthly holding costs / Units in stock
$29,000 / 30 units = $966.67

DAILY HOLDING COSTS
Monthly holding costs per unit / # of selling days in the month
$966.67/ 30 days = $32.22 per day

Breakeven Measurement

How long can you hold a unit in stock?

The number of days the unit can remain on lot to breakeven.

A formula demonstrating Steering Success: average gross profit divided by daily holding costs equals max days to hold a unit in stock, shown with sample values and result—$2,225 / $32.22 = 69.06 days.

See…Math is Fun!

▪  LOST REVENUE

Aged Inventory × $ Potential Earnings = Lost Revenue
10 units × $6,675 = $66,750 lost revenue

A man in glasses and a plaid shirt stands in front of a chalkboard filled with mathematical equations, holding a small trophy and proudly steering success—an achievement celebrated by GIADA.
▪  HOLDING COSTS

Monthly Holding Costs per Unit / Number of Selling Days within the Month = Daily Holding Costs
$966.67 per unit / 30 days = $32.22 per day

Using a 60-day avg. turn-time, subtract from the total number of days in inventory to get a true loss
180 days in stock – 60-day avg turn = 120 days
120 days × $32.22 holding cost per day = $3,866.40/unit
$3,866.40 × 10 units = $38,664 in holding costs

▪  TOTAL LOSS FOR AGED INVENTORY

Lost Revenue + Total Holding Costs = Total Loss
$66,750 lost revenue+ $38,664 holding costs = $105,414 in total loss

Checkbook Profit Comparison

What is it?

The difference in checkbook profit based on the unit’s days on lot

How is it Calculated?

Checkbook Profit Lost
# of Turns x Gross Profit Target

Three Areas of Focus

It’s a Fiercely Competitive Market
(not in your control)

Internal Measures You Can Take to Maximize Profitability
(in your control)

Bringing it All Together
(How do your dealership numbers stack up?)

Key Management Tools

A balance sheet dated May 31, 2024, prepared by IADA, lists assets including bank accounts, contracts, inventory, vehicles, furniture, and other assets—Steering Success with a total of $8,511,861.69.

Strongest Considerations

  • How much cash on hand?
  • Where should I be looking for cash?
  • What are my holding costs and their impact on cash?

Resilient Dealership Checklist

  • Understand market volatility and how trends impact your dealership
  • Source smarter by diversifying acquisition channels and avoiding overpriced inventory
  • Stock the right mix by balancing fast-turn units with high-margin opportunities
  • Control holding costs and define clear age thresholds to minimize risk
  • Run breakeven and lost revenue analyses to make informed sell/hold decisions

MOVE FORWARD

BE KINETIC

MOVE FORWARD

BE KINETIC

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