Are those used cars, SUVs and trucks on your lot cash flow enhancers or cash flow stoppers? Congratulations if it is the former because approximately 40 percent of your net worth is in your used vehicle department. If it is the latter, here are some suggestions to help you unclog the money pipeline.

Manufacturers use three measurements to determine the size of a used vehicle inventory for a new dealership. The measurements should apply to established dealerships, too.

The first is a 55 percent trade rate. You should take in trade at least 55 percent of the vehicles you appraise in any given month. You can quickly measure by reviewing the used vehicle sheets managers have written during the month and dividing them into the number of vehicles taken in trade.

If you are meeting the 55 percent test, you can focus on determining when trades are being made – the first 15 days of a month or the last 15 days. If most trades are coming at the end of the month you should review with your managers which vehicles were appraised early in the month and find out why they moved slowly. Over time trends should emerge allowing you to develop ways with your managers to move the vehicles faster.

Manufacturers’ second measurement is a 45-day turn. Manufacturers know that the chance for return on investment in the first 45 days is 64 percent versus less than 10 percent beyond 45 days. If you are failing the 45-day turn measurement check to see how long it is taking your service department to recondition vehicles. It should take no longer than 72 hours. Also, find out how many demonstrations a particular vehicle is involved in during the first 15 days of a sales cycle. If the number is high but the car hasn’t sold, find out if managers are holding out for too much money or if there is something wrong with the car.

Results of tracking will enable you to take appropriate actions. For instance, you may discover vehicles are not being rotated on your lot. Since 60 percent of a dealer’s customers come from drive-bys, you should rotate vehicles on a weekly basis.

By rotating weekly and determining in which spots cars were located when they sold, you will be able to determine where the hot spots are on your lot for certain vehicle types.

Finally, manufacturers measure regionally the average cost for a used vehicle in a particular product line to help with pricing.

Since used cars are cash and the longer they are on your lot the more they depreciate, you need to move them fast. Practice these measurements and your used car department should become more valuable to you.