Inventory Turn

Inventory turn, or inventory turnover rate, measures how many times a dealer's vehicle inventory is sold and replaced over a given period, typically calculated on an annual basis. It is derived by dividing the total number of vehicles sold by the average number of vehicles in inventory at any given time. For example, a dealer who maintains 50 vehicles on the lot and sells 600 per year has a turn rate of 12. The industry benchmark for used vehicle operations is generally 12 or more turns per year, which equates to roughly 30 days' supply.

Inventory turn is one of the most important profitability metrics in used car operations. Faster turns mean lower floor plan costs, less exposure to market depreciation, and more consistent cash flow. Dealers who allow inventory to age, with units sitting 60, 90, or more days, face compounding problems: rising carrying costs, price reductions that compress gross, and vehicles that become increasingly difficult to sell.