Tips for Protecting Auto Dealership Inventory
Car dealerships work with high-value, slow-moving inventory — vehicles. At any given time, your business could have millions of dollars tied up in inventory. And, since both new and used cars are a once-in-a-while purchase for most consumers, your average vehicle may spend a long time on your lot.
The high value of a new car can make your inventory particularly vulnerable to damage, and the length of time each vehicle spends at your lot increases its chances of becoming damaged in your possession. Thus, every car dealership owner needs to consider multiple solutions to protect their investments.
The Importance of Protecting Your Car Dealership Inventory
Auto dealerships often have many cars parked outside and exposed to potential risks. The two biggest threats facing auto dealership inventory are theft and, depending on the area, hail. Another concern is fender benders on the lot, which, while repairable, can lower your inventory value.
Protecting your auto dealership's inventory is thus becoming more crucial than ever. Here's why.
1. The Risk of Hail May Be Increasing
If your dealership is in the hail belt, you've probably felt like there have been a lot more hailstorms lately. Statistics show that it's more than your intuition — hail storms are becoming more frequent, costly, and widespread. From 2000 to 2013, U.S. insurers paid out $54 billionto cover nearly 9 million claims. A whopping 70% of those claims occurred in the last six years of the period, with the average claim being 65% more costly than a claim from 2000-2007.
As hail-related losses increase, more dealerships are also at risk because hailstorms are covering a larger footprint. Outside of the traditional hail alley, which spans from Colorado, Nebraska, and Wyoming to the Midwest, hail is also spreading to the Gulf Coast, the Southwest, and Appalachia. Hail insurance provider Understory has tracked a broad rising trend in hailstorm frequency since 1979 and estimates hailstorms are gaining new territory at a rate of 1.1% each year.
2. Hail Insurance Costs Are Rising
Meanwhile, the cost of hail insurance is, quite logically, increasing as the risk does. In 2018, a major auto insurance provider, Zurich North America, canceled hundreds of dealerships' insurance policies, citing the increase in losses due to hail. As this change affected the market, one dealership went frominsuring their dealership for $160,000in 2017 to nearly $600,000 in 2019. It's becoming more expensive to insure your business against this growing threat.
3. Auto Dealership Inventory Is at an All-Time Low
The consequences of losing inventory are also becoming more severe. The ratio of auto industry inventory to sales hit an all-time low of 1.03in April 2021 amid supply shortages of automotive parts such as microchips. These numbers mean dealerships have a much thinner buffer against inventory shrinkages like theft or damage. Kelley Blue Book also cites these lower inventory levels as a potential challenge in the customer experience, as specific models, colors and trims may become harder to find.
If your inventory gets damaged or stolen, it may be more challenging to replace your cars amid shortages quickly. This loss could mean you do not have the supply or selection to meet demand, and you could lose sales opportunities.
4. Auto Dealerships Are Becoming Targets for Theft
In 2019, the rate of car thefts in the U.S. was219.9 per 100,000 people, down slightly from 2018's 230.2. The total number of vehicle thefts was 721,885 in 2019. While robberies are down overall, the risk for auto dealerships is increasing.
That's because identity theft makes it easy for vehicle thieves to drive off a dealership lot with none the wiser. Rather than going after cars on the street, where they might have to smash a window and hotwire the vehicle, they can steal a brand-new, intact car. All these identity thieves have to do is present a fake ID and forged loan documents. These sophisticated techniques make preventing theft more complicated and more critical than ever before.
Tips for Keeping Your Car Dealership Protected
With the rising threats to your car dealership, you need a comprehensive solution to protect your vehicle assets from multiple threats. Here are some tips to protect auto dealership inventory.
1. Consider Parametric Hail Insurance
While traditional insurance for auto dealerships is on the rise, an innovative solution can help you protect your lot for less. Parametric insurance is common in agriculture to mitigate unpredictable weather and is becoming increasingly popular for dealerships. With this insurance setup, insurance providers can pay a premium to install a small sensor that triggers an automatic payout when it detects a hailstorm, regardless of the damage incurred.
This saves dealerships because traditional insurance raises hail insurance rates based on regional data. So a storm that occurs in the next town over that does not affect your lot may still raise your rates. With parametric insurance, your rates are affected only by the hail that impacts your business, lowering rates. It also allows your business to get payouts faster since you do not have to file a claim or document the damages.
However, while you can theoretically get a payout even if the hail detected does not damage any of your inventory, you might not receive full coverage for severe hail damage. Therefore, it's essential to weigh the risks and benefits against traditional hail insurance.
2. Optimize Your Business Layout Strategically
One strategy to prevent theft is to evaluate your lot for weak points and mitigate them. For example, where are the keys to your inventory kept, and how could someone access them?
Look at your dealership's perimeter, open lots, service desk, garage, and showroom for weak points, including how quickly a thief could access the area, unlock a car, and drive off. The service bay can be a particular area to pay attention to since you'll be keeping customers' cars and keys here. Burglary of a customers' car will result in financial and reputation loss, making security especially vital.
Once you have a general sense of your business layout, consider how you can shore up weak points. Maybe key storage should be moved to an area less visible to customers, in view of a security camera. Next, park your cars strategically. Your most expensive vehicles should be surrounded by other vehicles or barriers on all four sides, closing off an easy escape route. It's also wise to park your most valuable inventory closer to the building, where your staff can keep a closer watch over them.
To prevent bumps and scratches, be sure to designate spots for employees and customers to park away from your inventory. You can also use skilled valets to ensure confident drivers are moving your most valuable inventory.
3. Invest in Identity Theft Prevention
Since identity theft is a growing concern for dealerships, having more protections in place is critical. Some steps you can take to prevent these types of crimes include:
- Use software to track your identity theft program.
- Train your team to spot red flags like forged documents with wrong names or addresses.
- Take extra precautions with recently established credit accounts.
- Teach your salespeople to spot red flags like accepting a price without negotiation.
- Examine all credit checks and work with fraud detection services to look for any warnings.
- When any warning signs appear, ask for additional identification and questions that an identity thief could not answer with a stolen wallet alone.
5. Install a Hail Protection Canopy
If your dealership is in the hail alley or on the peripherals that are now starting to get hailstorms, a hail protection system can help you mitigate the risk of damage from hailstones. Vehicle hail protection systems from VPS feature durable fabric hail nets and durable parking structures. Our unique construction uses steel and durable fabric that can withstand hailstone impacts. By helping to prevent damage from hail, these structures can help your business avoid operational disruptions and loss of inventory.
Besides protection from hail, these canopies can also provide other benefits. They can offer shade for your lot to keep your customers cool while car shopping and can also offer UV protection to help preserve paint jobs and prevent UV damage. VPS can handle jobs of any size and design attractive, permanent solutions that add to your lot's curb appeal. Plus, we offer the ability to add other security accessories like lighting and surveillance systems so you can protect your inventory in multiple ways.
Work With VPS for Vehicle Protection
At VPS, we have various hail protection solutions specially made for auto dealerships with large lots of high-value inventory. Browse our commercial shade structures to get peace of mind and help protecting your car inventory from bad weather. Then, feel free to contact us for a free quote.