Used Vehicle Inventory Hedging.
Industries use financial markets to buy insurance to reduce exposure to changing costs that are completely out of managementís scope of influence. If the Manheim Used Vehicle Index is a true measure of macro trends and if the impact of these trends (good and bad) make it into daily operations, all the way down to the balance sheet, then we have the beginning of a business that can bring value to dealers everywhere.
Given the size of the opportunity, there are an army of Wall Street financial institutions like Merrill Lynch with analytical departments to assist in the design and execution of the hedging product. The product could be administered each time a car was bought (i.e. purchase hedging unit = 1% of purchase price), or, it could be done globally (22mill in inventory = $x hedge investment).
Dealers have many variables to defend against. The financial markets have many tools to hedge The Cost of Financing, Raw Inventory costs, Overall Market Conditions, Cost of Utilities, etc.. All can be identified and dealt with.
Sun Auto Group