When it comes to buying or selling a dealership, the goal is always to achieve the best possible outcome. One of the key factors in ensuring a successful transaction is properly valuing the inventory—especially the auto parts inventory. However, many dealers overlook the importance of a comprehensive inventory review before entering into negotiations. This can result in significant financial loss, with inventory being undervalued or inaccurately assessed.

In a typical dealership transaction, the auto parts inventory is a major asset that needs to be properly evaluated. Unfortunately, too many transactions only involve a last-minute inventory review—often just days before the sale—which doesn't allow enough time for thorough investigation. Without a full assessment, you risk underestimating the actual value of the parts you’re selling or overpaying for parts that hold little value. 

In this blog, we look at how you can ensure that your parts inventory is valued correctly, whether you’re buying or selling.

Understanding the Components of Auto Parts Inventory

A common misconception is that a dealership’s auto parts inventory consists only of spare parts used for servicing customer vehicles. In reality, the inventory includes much more. Aside from the obvious spare parts, dealerships also carry damaged parts, parts on order, or parts that have limited resale value. These non-saleable parts can heavily impact the overall value of your inventory.

Some of the key categories of parts that may not hold significant value in a transaction include:

• Damaged Parts: Items that have been damaged in handling or in storage and cannot be sold.
• Parts in Progress: Parts that are being used for work that is still in progress, making them unavailable for sale.
• Parts to Be Returned: Parts that need to be returned to manufacturers or suppliers.
• Obsolete Parts: Parts that are no longer in demand or are discontinued.
• Pending Credits: Items with outstanding credit claims or rebates yet to be processed.
• Core Value Parts: Parts that have deposit values, such as cores, which may require a deposit but aren’t directly saleable.

These non-saleable items reduce the true value of your inventory, meaning that if you have $100,000 worth of inventory on paper, only $85,000 or so might be actually saleable, depending on the extent of non-saleable items in stock. Knowing how much of your inventory is truly saleable is critical when determining the value of your business in a buy/sell transaction.

Saleable vs. Unsaleable Parts

One of the primary challenges in valuing auto parts inventory is differentiating between saleable and unsaleable items. Often, the inventory value recorded on your books doesn’t accurately reflect what is genuinely marketable. As a seller, knowing exactly what parts are in demand and what parts can be offloaded before the sale will allow you to negotiate a better deal. Similarly, as a buyer, you want to avoid paying for parts that won’t hold their value once you take over.

Why Timing Matters

Timing is critical when it comes to assessing inventory. Waiting until just a few days before the transaction to evaluate your parts inventory often leads to rushed decisions that don’t fully account for unsaleable items or inventory that can be returned for credit. A longer lead time allows for a thorough analysis, offering more opportunities to either dispose of non-saleable inventory or recoup some of its value.

For sellers, early preparation can be crucial. Knowing exactly what your parts inventory is worth helps you set realistic expectations for the sale price and helps avoid surprises down the road. Sellers also have the opportunity to make the transaction smoother by clearing out unsaleable inventory through manufacturer Return Inventory Management programs, further increasing post-sale profit.

For buyers, a comprehensive inventory review ensures you’re not paying for parts that have little to no resale value, which can be a significant hidden cost.

How to Maximize Your Inventory Value

When selling a dealership, ensuring that your inventory is thoroughly assessed before entering negotiations is key. Here are some important steps to take to maximize your inventory value:

1. Conduct a Detailed Inventory Review: Understand what is saleable and what isn’t. This will give you a realistic picture of your inventory’s actual worth and allow you to accurately reflect that in negotiations.
2. Dispose of Non-Saleable Items: Take advantage of return programs and liquidation opportunities to offload obsolete, damaged, or non-returnable parts before the sale. This will not only help reduce unsaleable stock but can also increase the value of your saleable inventory.
3. Leverage Manufacturer Programs: Many manufacturers offer Return Inventory Management programs that allow dealerships to return parts for credit, potentially helping you recover some value on unsaleable stock.
4. Use Professional Help: Working with experts who understand the intricacies of inventory valuation can ensure that you don’t miss any opportunities to recover value from non-saleable parts. The professionals at Pro Count West can help identify the saleable inventory and suggest ways to redeem some value from the unsaleable items.

How Pro Count West Can Help

At Pro Count West, we have the expertise and experience necessary to help you optimize your auto parts inventory during a buy/sell transaction. Whether you're buying or selling a dealership, we will work with you to identify which parts in your inventory are saleable and which are not. In addition, we can help you find ways to recoup value from parts that may not seem saleable at first glance.

Our goal is to ensure that your transaction is as profitable as possible by helping you maximize the value of your parts inventory. Whether you’re a seller looking to get the most for your dealership or a buyer wanting to avoid overpaying, we can assist you every step of the way. Contact us today to ensure that your inventory is valued accurately and that you’re getting the best deal possible in your buy/sell agreement.