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Struggling to make a profit from End of Life Vehicles?

damaged vehicle
A well developed management process will ensure that you make a consistent profit on all vehicles
With high scrap prices many auto recyclers are finding that they are struggling to purchase ELV’s at sensible prices, and prices are unlikely to drop in the near future.

One UK based auto recycler has developed their management process to make sure that they are making consistent profit on all vehicles, even at the current ELV market value. They know they will return at least £230 on each vehicle they process as scrap, and their average return on each vehicle purchased for parts is over £600.
So how do you return a decent gross percentage?
  • Choose a software provider that fulfils your stock control and vehicle management requirements; ensure that full training is part of the package.
  • Take time to learn the system and how it would best work for you.
  • Complete a full stocktake of vehicles and parts, identifying and labelling all available components.
  • Grade quality of all parts, 1 being best quality, 3 being poor quality.
  • Cross reference parts against manufacturer’s list price and set sales price according to part quality.
  • Make sure software is fully updated.
  • Give sales staff ability to adjust sales price to complete sale.
  • Record details of all parts that could not be sold – too costly or not available.
  • Track the ‘scrap’ price of every vehicle – i.e. revenue available for the hulk, cores, wheels, batteries, cat, etc – note this value will change almost daily so this has to be built into daily operations.
After a period of time the software system will be able to produce management reports that will highlight parts demand, how quickly parts are sold and parts that cannot be supplied due to lack of stock or cost, the system will also identify parts in stock that have not sold.

From this the auto recycler can refine their stock levels and sales costs to reflect demand, and target ELV supply to satisfy this demand.

The benefits to the auto recycler can be measured in profit because:
  • Only in demand parts are removed from ELV’s, any parts not needed for stock are left on the vehicle – reduces dismantling costs.
  • Storage of duplicate parts is kept to a minimum – maximises storage space for parts that will sell.
  • The auto recycler knows in advance of purchase what the ELV is worth to them and they can adjust their auction bid accordingly – avoids overpayment for supply.
  • If the potential return does not exceed the scrap price, purchase for processing only.
  • The Auto Recycler can receive a return on their investment very quickly as they only stock parts that are in demand.
  • Yard space is much better managed as vehicles that will not turn a profit inside a specific time-scale set by the business are sent for shredding - returning money back to the business.
  • Better customer service – sales staff can advise immediately on parts availability, quality, cost and delivery – if a customer gets good customer service once they will come back a second time.
Andy Latham
The writer of the this article is Andy Latham, Compliance Manager for Bluecycle, one of the UK’s leading online car salvage auction sites and online auction technology specialists. They have been trading for over 10 years and specialise in car salvage, end of fleet, motorcycle, plant, equipment and commercial salvage, selling hundreds of vehicles each week to customers throughout the UK and Europe. Andy is a motor vehicle engineer with over 30 years experience in automotive retail, motor insurance and vehicle salvage markets, he is married with 2 teenage children and supports Southampton Football Club.
Very quickly, the business will be able to see how much return they make from each vehicle and how soon after ELV purchase they start to make a profit, and they can then start to set targets to improve stock turnaround, profit, quality and so-on.

To get the ultimate will take investment, time, dedication and training, the long term benefits far outweigh the initial pain, and will ensure continued profit for the business that will then turn into investment, development and growth.

Software packages are available that assist auto recyclers to manage vehicles, control stock, sell parts, and more importantly - assist profit growth. Actual Systems and DH Systems are two systems that are in use, there are more - so search carefully to make sure that you get the right software for your business.

Visitors to CARS, the Complete Auto Recycling Show will have the opportunity to take a close look at the systems on the market. There will also be seminars investigating at how you can effectively how you can profit from their use.

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