Cost of holding car stock: what each week actually costs

The cost of holding car stock is what you pay for a car that has not sold yet. It is easy to ignore because it does not arrive as one bill with the registration on it. Interest, or cash you cannot use, the space on the pitch, and a retail price that slips while the car waits: each one is small in a week and obvious after two months.

Days in stock is the count. Holding cost is the money on that count. This is a way to see it. The figures in the example are made up so the arithmetic is visible. They are not a rate you should copy.

What the cost of holding car stock includes

Start the clock on the day you pay. Not the day the advert goes up, and not the day the car comes back from the valet. The money left your account at the start. Every day after that is a day it is not buying the next car.

Three lines cover most independent sites.

The cash. If you borrowed, use the interest you actually pay. If you paid from your own account, use a figure you believe for what that cash could have done instead. Do not pretend owned money is free. It is the next car, or the wages, or the VAT.

The space. A pitch has a rent, or a yard has a cost, whether or not you divide it by the cars. A car that sits is occupying a space a faster car could have used. You do not need a surveyor. You need an honest slice of what the site costs you in a month, divided by the cars you mean to keep there.

The price. Local buyers see a fresh car. If it is still there a month later, many of them have already decided. The retail price you can ask usually does not rise to compensate. Often you cut it. That cut is part of the hold, even though you experience it as a decision on a Thursday rather than as a weekly drip.

Prep costs are separate. They are the work to make the car sellable. Holding cost is the wait after that, and during it. Used car margins assume you know both.

Illustrative example

Illustrative example, not a result and not a rate. Suppose you have paid eight thousand pounds for a car. Suppose the cash costs you about eighty pounds a month while it sits, which is one percent of that money, as a round assumption you will replace. Suppose the pitch works out at forty pounds a month for the space the car takes. Suppose you expect, from your own experience of this sort of car, to drop the advertised price by about two hundred pounds if it is still here after a month, because the first wave of local interest has gone.

On those assumptions the first month costs eighty, plus forty, plus a two-hundred-pound cut you are likely to make. That is three hundred and twenty pounds, before you have paid for another advert or another valet. None of it was on the invoice the day you bought the car. All of it comes off the margin you thought you had.

Change the assumptions. If your money is cheaper, the eighty falls. If the car is the sort that still sells in week five at the same price, the two hundred does not belong in the sum. If your yard is dearer, the forty rises. The shape of the sum is the point. The pounds are yours to fill in. If you cannot fill them in, you do not yet know what a slow car costs you, which means you are deciding prices without that fact.

That example is not a reason to buy faster cars from a screen. It is a reason to know the number before you agree the price. If you would rather more of the metal was chosen for retail in the first place, get your buying site.

What the weekly number is not

It is not a reason to panic on day three. Some cars need a week of prep before anyone should see them, and that week was part of the plan when you bought. The number is there so the planned week and the unplanned month do not get mixed up. A car in the bodyshop because you knew about the wing is different from a car in the bodyshop because you did not look.

It is not a market statistic. Nothing in the example is a rate the trade is "on" this month. Interest you pay your own funder is a fact about your agreement. A price drop you expect is a fact about cars you have already watched sit. If you have not watched, do not borrow someone else's story. Leave the line blank until you have one of your own.

It is not a substitute for the buying decision. A car bought too dear does not become sensible because you have a weekly figure. The figure tells you the cost of waiting. It does not repair the cost of the purchase. Put the holding number next to the margin you thought you had, on the day you buy, and see if the margin survives a month. If it only survives a fortnight, that is the fortnight you have. Price it and show it inside that window, or do not buy it.

Two cars at the same purchase price can have different holding costs. The one local buyers already understand, with history you can show, usually needs less time and a smaller cut. The one that needs a story, or a repair you have not priced, needs more. The weekly sum is how you tell them apart before the pitch fills up with the second kind.

When to look at it

Look in the first fortnight, not on day sixty. Day sixty is when the car has already had its chance with everyone nearby. A cut then is you admitting what the weekly number was trying to say in week two.

Decide in advance what you will do at a count you choose. Some sites review at thirty days and price again. Some move a car to trade if it has not had a serious offer. The rule matters less than having one you will follow when you like the car. Liking the car is not a holding strategy.

A car you bought well and priced late can cost more than a car you bought ordinarily and priced while it was fresh. The hidden costs of buying at auction stop at the point the car arrives. Holding cost starts there.

If fewer of your cars started as a slow auction purchase, and more of them arrived from someone local who already wanted to sell, the clock still runs, but you chose the car with the retail in mind. Get your buying site if that is the stock you would rather be standing.

See what the fees come to on the auction cost calculator, or try the live demo.