Automotive Inventory Management: All You Need To Know + 4 Tips

A lack of proper inventory management is a good way to leave a dealership’s sales agents scrambling—and its customers looking for their next vehicle elsewhere. Dedicated inventory management software (also called Dealership Management Systems or DMS) is something of a prerequisite for any modern automotive dealership looking to save on costs and preserve a positive customer experience.

The latest inventory management software also benefits from advancements in AI, which means more automation when projecting demand for certain vehicles and an easier time pulling performance metrics to locate any pain points hidden within a dealership’s sales process. In fact, the whole point of inventory management software is to elevate the rest of a dealership’s essential functions.

Understanding Automotive Inventory Management

Keeping parts and vehicles well-stocked in a cost-efficient manner saves dealerships time and conveys to customers a confident, professional process for finding a car they love. Effective inventory management is best achieved through AI-powered management systems, which benefit a dealership’s internal processes and its customer-facing reputation.

Types of Inventory in the Automotive Industry

A car dealer inventory management system is designed to keep track of the finer details concerning a handful of general product and service types. New vehicles are perhaps the most obvious, as shoppers almost certainly need details on an advertised make and models’ specs (plus any custom add-ons) before taking a genuine interest.

Used vehicles go a layer deeper, with carefully documented service histories, mileage, number of owners, and other indicators of the vehicles’ prior treatment. This is likely the inventory type in which data is the most beneficial; a lost or missing vehicle history tends to raise red flags among customers.

Then there are the smaller (but still significant) items worth keeping track of. These might include vehicle accessories for added sales opportunities (who doesn’t love a good roadside assistance kit or some premium floor mats?), as well as the supplies or tools customers might need to perform some of their own basic vehicle maintenance.

Managing Automotive Inventory: Key Challenges

Dealer inventory software does more than provide a read on what’s currently sitting on the lot; it also projects what needs to be on the lot in the near future. Projecting demand is tricky business even for AI models trained on years of data though, and the numbers will hardly ever come out perfect.

Instead, a good DMS calculates the cost of ordering, transporting, servicing, and storing vehicles, and it compares the results to anticipated sales figures (which are themselves based on historical trends as well as other reliable projections like vehicle depreciation). In effect, the software tracks how optimally a dealership can buy and sell vehicles based on its overall operating costs.

Inventory Management Strategies for Car Dealerships

Inventory management software is a tool, and just like any tool used in car sales, its usefulness depends on how well a dealership plays to its strengths. Selling customers a new vehicle still happens in person; making sure that the vehicle is on the lot and ready to roll when the customer walks in happens behind the scenes.

Here are four ways a good DMS can help a dealership get the most out of its inventory:

1. Improve Demand Forecasting Techniques

Forecasting can be simplified considerably by first prioritizing inventory by its approximate rate of turnover. Barring some truly exceptional circumstances, that lightly-used 488 GTB won’t need be going anywhere soon. A DMS will note this and adapt, just as it will note your rapidly dwindling stock of Rav4s and Tacomas. Utilize your inventory management software to evaluate which vehicles move fast, which tend to stick around the lot for a few weeks, and which probably only need replacing on rare occasions.

2. Optimize Just-in-Time (JIT) Inventory Management

JIT inventory strategies aim to reduce a dealer’s carrying costs, the true cost of keeping a car on a lot. Carrying costs extend well beyond a car’s price tag and include the cost of insurance, storage space, maintenance, depreciation, and eventual obsolescence (meaning any vehicle lagging behind the newest model year or tech standards). JIT inventory minimizes these costs, but it does so at the risk of losing out on sales if opportunity comes knocking and vehicles are in short supply.

That’s where a DMS provides a boost, allowing more careful inventory acquisition to minimize costs. Facing the risk of carrying too much costly inventory on one hand and lost sales opportunities on the other, a dealership’s best option to split the difference is often through an automotive inventory management system. The system can handle real-time adjustments to vehicle pricing and availability, help sales teams give customers a detailed look at their used car or new vehicle of choice, and perform its automated functions without pulling agents away from a customer.

3. Inventory Turnover and Reduction Methods

Customers will recognize most “inventory turnover” methods by their more enticing names: discounts, sales events, and promotions designed to keep inventory churning. Lot space is a finite resource; generally, the more space a dealer can dedicate to in-demand items, the better. That means knowing what’s in demand now as well as what will soon be in demand (at least far enough in advance to notify suppliers).

A DMS can identify when to run promotions to offload inventory before its value plummets and enforce healthier supplier relationships by forecasting needs rather than reacting to sudden shifts in demand.

Automotive Inventory Management: Best Practices & Tips

Implementing inventory management the right way keeps the rest of a dealership’s daily operations (relatively) chaos-free. Here are a few best practices for ensuring any new inventory software doesn’t interfere with your business:

Organize Inventory Effectively

A good inventory management system tracks which vehicles are currently on your lot; good organization keeps those vehicles in order and makes them easy to locate. Simple organization techniques may not seem like much, but they can be the difference between salespeople confidently showing a buyer to their scheduled test drive and zig-zagging across the lot in search of one specific Honda two minutes before an appointment.

Implement Automated Inventory Tracking Systems

Selecting an inventory management tool based on its various features and integrations gets most of the attention when dealerships decide it’s time for a systems upgrade. But what about the time it takes to integrate into your current setup? Or to train employees on the new platform? It’s tough to get the most from a DMS without a clear plan for implementing the software’s automations.

Monitor and Analyze Key Performance Indicators (KPIs)

The DMS itself might be used to gauge dealership stockout rates and carrying costs, highlighting whether or not the software’s primary function is doing its job. Most systems support some combination of reporting and performance analysis.

Collaborate with Suppliers for Better Inventory Control

If a dealership’s calls for replacement inventory consistently stick suppliers with unrealistic delivery deadlines (for example, in the event of a promotion pushing more vehicles off the lot than anticipated), the relationship can sour quickly. Dealers and suppliers should work together on setting inventory management thresholds and determine when to order new vehicle makes and models.

AI in Automotive Inventory Management

AI presents a potential leap forward in how dealerships operate. Automating processes like emailing back and forth with an inquisitive customer or updating sales reports with real-time information gives sales agents more time back in their day for meeting with and closing potential buyers. The automotive industry has already seen a number of changes become mainstream thanks to AI:

Predictive Inventory Management

AI can take in immense datasets to determine future inventory needs. Accurate forecasting is key to keeping dealership costs down and mitigating the supply chain’s risk for disruption.

Dynamic Pricing Strategies

However quickly a dealership thinks it can adjust prices to market norms (or to competitors), AI is quicker. By evaluating pricing trends in real-time, AI can dynamically change prices to maintain a steady flow of customer demand.

Autonomous Inventory Replenishment

Inventory management AI tracks the vehicles on a dealership’s lot, as well as how long those vehicles are expected to last before selling. With this calculation constantly running in the background, AI can order more of a certain inventory type whenever a dealer’s stock falls below a preset threshold.

AI-Based Analytics and Insights

Using AI to find patterns within your data produces insights that may have otherwise gone unnoticed by even the most skilled analyst. AI feeds off of a dealership’s historical data to learn how seasonality might impact sales, when to tinker with prices to match economic conditions, and how best to run promotions to clear lot space.

10 Best Automotive Inventory Management Tools of 2024

Inventory management software tools for car dealerships have a lot to offer by way of features, automation, and specific areas of focus. Here are the ten best you’ll find for keeping dealerships organized and introducing customers to new vehicles:

1. DealerCenter

What makes it great: Its reputation for straightforward UIs, easy learning curves, and extreme utility has helped DealerCenter become one of the most widely-used DMS solutions around. There are few do-it-all systems better suited for the independent car dealer than DealerCenter at this price point.

Key features & AI capabilities: Real-time inventory tracking, AI-based demand forecasting, complete CRM, payments, and paperwork capabilities.

Pricing: Starts at $60/month

2. DealerTrack DMS

What makes it great: With nearly a decade of Cox Automotive’s supportive backing, DealerTrack has grown into a cloud-based DMS solution for small- to mid-market-sized dealerships seeking a feature-filled inventory management system. DealerTrack’s biggest selling points include high-level data security systems and a lengthy list of integration possibilities.

Key features & AI capabilities: Well-supported API integrations, AI-driven forecasting, analytics, and reporting.

Pricing: Varies; requires contact for more details

3. AutoManager

What makes it great: A strong combination of DMS and CRM capabilities, AutoManager is especially useful for sales teams looking for a HubSpot alternative designed specifically with car dealers in mind.

Key features & AI capabilities: Easy to sort inventory and develop reports. The cloud platform allows remote access.

Pricing: Starts at $125/month

4. CDK Global

What makes it great: Not only can CDK handle a dealership’s heavy lifting when it comes to monitoring inventory, sales figures, and predictive analytics, but it also integrates cleanly between departments. That means keeping teams on the same page without any massive disruption because someone missed catching up on an email thread.

Key features & AI capabilities: Good API compatibility, AI inventory forecasting, and detailed training via CDK University.

Pricing: Varies; requires contact for more details

5. EverLogic

What makes it great: EverLogic’s modular software system boasts dozens of different features in a strong play for the “most bang-for-your-buck DMS” award. A notable lack of API integration and real-time analytics may knock it out of contention for some. However, a strong reputation for customer service and cost-effective tools across the board makes it a worthy consideration for many small-to-medium-sized dealerships.

Key features & AI capabilities: Inventory management, sales management, automated scheduling, calendar management.

Pricing: $129/month

6. AutoAction

What makes it great: AutoAction’s inventory management software stands out for a few reasons. First, it was developed by an actual used car dealer based out of Houston. Second, while offering a full suite of tools (including dealership, inventory, and BHPH contract management) it is only available to independent car dealers in the state of Texas.

Key features & AI capabilities: Inventory acquisition, dealership management, Texas-specific compliance tools and documents

Pricing: $50/month

7. AutoRaptor CRM

What makes it great: Almost two decades of inventory management software development give AutoRaptor the advantage of being both easy to use and easy to find training (via live online chats or recorded webinars) if you do get stuck. AutoRaptor’s various automations can be put to work without much fuss, and its integration ecosystem includes virtually every industry staple.

Key features & AI capabilities: Lead management, AI-based lead scoring, and extensive automations for sales teams.

Pricing: Starts at $399/month

8. Autosoft

What makes it great: It’s not easy to build inventory management systems with highly specific tools unique to one industry while maintaining flexibility. Autosoft brings versatility to the DMS space in exchange for a slightly older-feeling (but still plenty usable) UI.

Key features & AI capabilities: Inventory optimization tools, custom dashboards, accounting, and finance management.

Pricing: Varies; requires contact for more details

9. DealerSocket, Inc.

What makes it great: DealerSocket’s main draw comes from a promise to streamline workflows (in addition to managing dealership inventory, obviously). By keeping customer and dealership information all in a readily available one-stop-shop, DealerSocket is equal parts time-save and gateway to most other mainstream automotive programs via smooth integration.

Key features & AI capabilities: Simplifies lead management, customer service, and marketing activities.

Pricing: Starts at $750/month

Bringing Podium’s AI BDC to Your Dealership

AI and automation are actively changing how auto dealers do business, but not every AI has the capacity to manage a dealership’s various internal operations. Podium’s best-in-class AI Employee, an always-on AI Employee built expressly for the automotive space, is among those rare tools that can.

Podium’s AI Employee responds to inquiring leads at any hour, schedules appointments in conjunction with synced business calendars, and automates email and SMS communications. Offering customers more natural engagement through AI helps sales, marketing, and service team members make the most out of their daily routine without running into low-priority distractions.

See Podium’s AI employee in action now with a free demo.