Should Dealer Groups Have a Centralized Buying Center? 

Centralized Buy Center

Why Centralize your Purchasing?

If you’re serious about reducing the amount of time you spend at the car auction consider a centralized buying center. Central buying or central purchasing, is the practice of relocating the authority and responsibility of a small purchasing team for individualized stores to one location for a whole group. The consolidation of the purchasing function by a large, multi-site organization into a central authority increases efficiency, inventory control, and purchasing power. Central buying is commonly used by multisite automotive retailers, to buy centrally for individual locations. This can be highly effective in controlling inventory levels and improving profitability.

Benefits of a Centralized Buying Center

Centralized buying has the benefits of consolidated purchasing power, standardization of purchases, enhanced professional purchasing skills and easier management of the buying function.

The major responsibilities of a buying center or a trade desk are;

  • Sourcing used cars for purchase both at live physical auctions as well as online.
  • Locating cars to buy from non-auction sites (craigslist, news paper, off the street…).
  • Answering trade calls from sales managers as they work deals.
  • Working with store managers to keep used inventory levels steady.
  • Working with the wholesale manager to move cars to the right locations or to the right auction.

Less Emotional Decision Making = Better Acquisition

Setting up a centralized buying center or a trade desk can make your used car departments run more efficiently. When the emotion is removed from the purchase or trade evaluation it allows the used car manager to focus on the customer, which results in more sales and a higher profit. When you are working a deal, it is easy to become wrapped up in the heat of the moment and push a trade number past the actual cash value (ACV). If the number is delivered from a trade desk or wholesale manager it is more difficult for the consumer to disagree. The same urgency to buy can arrive at the auction. If you are buying cars that you are responsible to retail, somehow you convince yourself it is okay if you pay too much. This is a bad plan if you are trying to make money. This is where the wholesale buyer or trade desk works best. They are given a cap on how much to pay per car and can quickly call back to the store if a new game plan is needed.

This practice of a centralized buying center has been working well for dealers all over the country. Most stand alone dealers will have a buyer or wholesale manager to handle their used car inventory, which does not scale well for larger groups. If you are a multi-franchise dealer group you may want to consider having at least one representative for your different brands (Ford, Chrysler, Imports, GM and High-line).

Staffing a Buy Center:

Staffing the trade desk with two or three individuals that each work with a set of stores or with a specific brand is most beneficial. This gives the buyer better product knowledge and a greater understanding of each market. The team should work together with sales managers as a part of the trade evaluation process, sharing their opinion on what every trade is worth.

Having a solid trade process and a consistent buying plan will keep your lots full of the right cars and improve the bottom line. Remember the more used cars you trade, the less time you will spend at the auction, and the more time you have to sell.

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