Shawn Foster, DealerStrong's Executive Trainer, answers questions most dealerships find themselves asking such as: "How do I determine what inventory I need?" "Where do I look for that kind of inventory?" "What opportunities am I missing out on?" and "What problems will I encounter?"

1. Shawn Foster
Executive Trainer
Sourcing Winning SF Inventory
5 Keys to Success

2. 5 Keys to Success
1. Understand your data
2. Determine your needs
3. Know your lenders
4. Develop a strategy
5. Use discipline

3. What Can You Sell?
• Historical data
• What is selling from the dealership
• Reconditioning abilities
• What can you get done effectively?
• Customer demographics.
• What is the makeup of the customer in your store?
Credit, income, market demands?

4. Sample Dealer Demographics
Score # Bureaus % of
Bureaus
# Delivered % of Burs. in
range delivered
Zero Score
1 – 484
485 - 539
540 - 619
620 - 660
Military
Open Chap 7
Prime (661+)
Total

5. Opportunities Stand Out
Score # Bureaus % of Bureaus # Delivered % of Burs. in
range delivered
Zero Score
1 – 484
485 - 539
540 - 619
620 - 660
Military*
Open Chap 7*
Prime (661+)
Total

6. Opportunities Stand Out
Score # Bureaus % of Bureaus # Delivered Available Inventory
(units)
Zero Score 45 9% 4 3
1 – 484 169 33% 11 3
485 - 539 75 15% 3 2
540 - 619 138 27% 19 11
620 - 660 83 16% 17 38
Military 34 4% 5 3*
Open Chap 7 27 4% 0 6*
Prime (661+) 249 33% 59 91
Total 759 100% 118 157

7. Subprime Credit Tiers
(example based on SF company data)
Special
Finance Tiers
Finance
Companies
Credit Score,
Income & Other
Customer Traits
General Term and
APR Range
Monthly
Payment
Average
Tier 4
Tier 3
Tier 2
Tier 1
CAC/Westlake
GO / UAC
Santander/
GLS / ACA
Chase/Wells
Exeter / CPS
GM Financial
Capital One
GM Financial
Capital One
Ally / Chase
Wells Fargo
Santander
450 – 540
Low and hard to
prove income
Missing docs
525 – 575
$2,500 - $3,000
Short job or
residence
540 – 610
$3,500 - $4,000
580 – 660
$4,500 - $5,000
45 months
25% APR
62 months
21% APR
66 months
16% APR
69 months
11% APR
$300 -
$330
$375 –
$425
$400 -
$450
$450+

8. The Problems
Unicorns
High reconditioning
Everyone wants them
Usually trades, not purchases

9. What are They?
ACV usually less than 10K
4-9 model years old
Typically serves the bottom tier programs

10. Used Vehicle Inventory by Tiers
Tier/
Niche
% of Stock Units Max. Age Max. ACV Max. Miles Avg.
Monthly
Payment
No Score 9% 4 9 $11,000 90,000 $359
Tier 4 42% 17 9 $11,500 125,000 $400
Tier 3 15% 7 6 $12,800 80,000 $407
Tier 2 27% 13 5 $14,000 75,000 $403
Tier 1 16% 8 4 $15,000 50,000 $397
Open Ch
7(part of T3)
4% 3 5 $12,500 70,000 $419
Military
(part of T3)
4% 3 6 $13,500 75,000 $403

11. Pre-Owned Subprime Inventory
and Where to Buy it
Tier Vehicles Source
T1
(best non-prime
credit)
Current year used (like-invoice), near
luxury, well equipped, upper end rental
units, off-lease units.
Physical & online auctions, off-brand franchise
dealers vehicles.
T2 1 – 3 year old rental cars, less expensive
current year (like-invoice), off-lease,
fleet returns (PHH, ARI).
Physical & online auctions (fleet & lease lanes),
GSA, rental car companies, off-brand franchise
dealer vehicles, street purchases.
T3 Less expensive rental cars & fleet
returns, new (or late model) trade-ins.
Physical auctions (fleet & lease lanes), GSA,
CarMax, rental car companies, off-brand franchise
dealer vehicles, street purchases.
T4
(worst sub-prime
credit)
Older, higher mileage units most often
taken in trade, inexpensive rental cars.
Units taken as trade-ins, street purchases, franchise
dealers, CarMax and GSA.

12. What Should I Buy?
Everything
Cars with slightly higher mileage
Rental cars
Lease turn ins, Repos
Private Owners

13. Higher Mileage Units
Understand where the finance company limits are
and use discipline.
Many subprime finance companies are going 66+
months on vehicles under 70,000 miles.
These units are great payment cars.

14. Rental Units
With the average amount to finance in Tier 3 at
$16,798, rental units are a great source for this
customer.
Newer car with slightly higher mileage

15. Lease Returns and Repos
May run later in the sale
Often have low floor
amounts and are there to go
away.

16. • Public boards
• Appraisal events
• Buy events instead of sale events
• Private Sellers, Estate Sales, Retirement
centers
• Housing complexes
Community

17. www.gsa.gov
SmartAuction
Manheim/Ove
Physical auctions
3rd party auctions
(list some here)?

18. UCM/Inventory Disconnect
• Using tools vAuto/AAX/Redbumper and
MMR.
• Often does not work lease/repo lanes.
• Often does not buy units with slightly
higher mileage.
• Does NOT know what the need is.
If any of these describe your UCM, your
used vehicle profits are lower than they
should be.

19. Start looking
Start asking
Start winning
(In the Mirror)

20. In Your Store (Dealership)
Employee Programs
Signage
Service Drive
Data Mining
Dealer Groups

21. Employees
• Establish a buying program for the employees
referrals.
• Friends, family, others.
• $300 - $400 fee attached to vehicle
• High Gross Deals when sold
• 30 employees, 1 car per year, $100,000 in
found gross profit

22. Service Drive
• Consider putting a salesperson on the drive.
• Customers with high ticket repairs on older car
• Offer free appraisals while the car is in the shop.
• Spiff your service personnel to spot potential
customers who may trade.

23. Internet
•Facebook
• Craigslist

24. Cars That Can Be Financed
• Understand your finance company demographics
• Use a spreadsheet to isolate opportunities
• Learn the “deal killers or “knock out” cars
• Behind NADA Clean Trade (target is $500 or
more after service on the lot)

25. How Can You Make It Easier?
Mileage Buy for >$1,200 under Trade
Pmt Term 24 36 42 48 54 60 66 72 Buy for >$1,200 to $750
2,100 3,400 4,000 4,600 5,000 5,500 5,900 Avg Book Buy for <$750 under trade
200 1,800 2,500 3,100 3,600 4,200 4,600 Buy For
2,500 4,000 4,600 5,200 5,700 6,300 6,700 Avg Book Tax Rate 6.00%
700 2,400 3,200 3,900 4,500 5,100 5,600 Buy For Buy Fee $200
2,900 4,500 5,300 5,900 6,500 7,100 7,500 Avg Book Doc + Warr GP $785
1,200 3,100 3,900 4,700 5,300 6,000 6,500 Buy For Title +Warr Cost $750
3,300 5,100 5,900 6,600 7,200 7,900 8,400 8,900 Avg Book Avg. Recon $550
1,600 3,700 4,600 5,400 6,100 6,900 7,500 8,000 Buy For Avg Bank Fee $175
3,700 5,700 6,500 7,300 7,900 8,600 9,200 9,700 Avg Book
2,100 4,400 5,300 6,200 7,000 7,800 8,400 9,000 Buy For Avg APR 19.95%
4,100 6,200 7,100 8,000 8,700 9,400 10,000 10,600 Avg Book Avg. Down Pmt $1,000
2,600 5,000 6,000 7,000 7,800 8,700 9,400 10,000 Buy For Avg. Income $1,850
4,500 5,800 7,700 8,600 9,400 10,200 10,900 11,500 Avg Book Avg. PTI 15.00%
3,000 5,600 6,800 7,800 8,700 9,600 10,300 11,000 Buy For Avg LTV-Front 115%
4,900 7,300 8,400 9,300 10,100 11,000 11,700 12,300 Avg Book Avg. LTV-Total 135%
3,500 6,300 7,500 8,600 9,500 10,500 1,130 12,000 Buy For Desired Profit $2,500
5,300 7,900 9,000 10,000 10,900 11,800 12,500 13,200 Avg Book
4,000 6,900 8,200 9,400 10,400 11,400 12,200 13,000 Buy For Green Buys $750 $750
5,700 8,400 9,600 10,700 11,600 12,600 13,300 14,100 Avg Book White Buys $1,200
4,400 7,600 8,900 10,100 11,200 12,300 13,200 14,000 Buy For Red Buys >$1,200
Adjustable Inventory Purchasing Guide
275
300
325
350
79.9K 69.9K 59.9K 49.9K
225
250
425
450
Taxes and Fees
Deal Averages
Color Keys
375
400

26. Summary
• Understand your customers
• Understand your inventory
• Understand your finance companies
• Have a strategy
• Use discipline

27. Thank You. 
For More Information:
 Visit http://www.dealerstrong.com/
 Call our office @ 877-811-8107