Tractor Zoom Releases Carrying Cost Feature to Help Dealers Boost Profitability
10/10/2023Available now for all users of Tractor Zoom Pro Inventory, the new Carrying Cost feature helps dealerships quickly calculate and monitor carrying costs in real time. The new feature will enable them to make pricing and inventory turn decisions before costs pile up, enhance profitability, and ensure efficient use of their borrowing capital.
Used equipment inventory key performance indicators (KPIs)
When it comes to managing dealership profitability, today’s dealers recognize leveraging data is critical to drive results. As farm equipment supply returns and on-farm profitability erodes, dealerships are preparing for the ag equipment market to return to normalcy. Having defined inventory KPIs and the ability to keep a real-time pulse on them can be the slight edge needed to remain profitable, despite a slower market.
When asked what key performance indicators are currently tracked as it relates to used equipment inventory, only 48% of dealerships cited carrying costs as a regularly monitored KPI. Carrying costs, also referred to as holding costs, are the expenses related to keeping used equipment in inventory for a specified period. It is primarily the cost of financing the equipment as well as storage, insurance, and depreciation.
While carrying costs may not have been a major concern in recent years due to low inventory and high demand, Andy Campbell, Director of Insights at Tractor Zoom, pointed out that trending inventory build-up can risk dealership profit potential due to increased holding costs. He noted, “One reason holding cost is not often emphasized is because the measurement can be ambiguous and is measured well after the cost is incurred.”
To address this challenge, Tractor Zoom has released a new Carrying Cost feature as part of its Tractor Zoom Pro Inventory product. This feature automatically calculates holding costs based on a dealership’s inventory levels and specific formula inputs, which include:
- Interest & Opportunity: The annual percentage rate (APR) of the principal amount borrowed for financed equipment.
- Taxes & Insurance: Taxes associated with equipment ownership, which may vary by state.
- Warehousing: Expenses related to equipment storage.
- Handling: Expenses for moving, loading, unloading, and storing equipment.
- Depreciation: Price decline attributed to equipment usage (hours in the field).
- Obsolescence: Price decline occurring over the equipment’s lifetime (not hours in the field).
Calculating carrying costs in Tractor Zoom Pro
Tractor Zoom Pro users can conveniently access the carrying costs associated with their inventory at different levels, including aggregate, category, subcategory, or individual Make/Model levels. Within Tractor Zoom Pro Inventory, users can simply click the “Carrying Cost” button to instantly view the relevant carrying costs based on their search filters. When viewing at an aggregate, category, or subcategory level, annual carrying costs are calculated.
When it comes to understanding the opportunity cost when repricing individual units, carrying costs are represented as a monthly expense. This can be viewed by clicking on the listing and selecting “Carrying Costs” at the top of the pop-up window.
In addition to this new feature, we've implemented changes to the user interface (UI) of Inventory that improves the accessibility and visibility of the data, tools, and settings within the platform. An expanded data table, filter chips display, and a filters panel are part of the update.
In the carrying costs feature, Admins within Tractor Zoom Pro can easily customize calculation inputs by eliminating unnecessary fields and adjusting preset amounts to align with their dealership’s valuation methodology.
Kali Sheridan, Director of Customer Success at Tractor Zoom, demonstrates how easy it is to view and edit carrying costs within Tractor Zoom Pro.
Next, watch Andy Campbell demonstrate how analyzing likelihood to age and carrying costs information can help dealerships make informed decisions and streamline repricing strategies.