Zinger Newsletters - What’s The Real Issue?

The odds are pretty good that your internal labor rate is $75 to $125 or more depending on a number of factors. Thus, your average reconditioning costs could be somewhere in the $800 to $1400 range.

Or, if you are a big time “Certified Dealer” then your cost per unit would be higher because of the factory requirements.

Let’s round the reconditioning number off to a nice $1000 per unit or whatever number you feel comfortable with.

The next part of this dissection is those wonderful little packs you add on to protect yourself from paying too much in salesman’s compensation and other little safeguards you feel you have a need for. I come from the “Pack Generation.” I’ve always loved packs, but this business has changed, I’ve changed and you should too.

Stop trying to justify it to yourself by saying you’re adding it back into gross and the managers still get paid on it.

On average, hard and soft packs combined run $500 to $1000. So let’s round that number off to $800. When you add the reconditioning cost and packs you have a total of $1800.

You are starting off from “jump street” with an $1800 cost disadvantage against those dealers who aren’t doing it the old-fashioned way. (CarMax and Texas Direct to name just two of them.)

The problem with the pack and recon “drug” is that it still sorta works and you can’t shake ‘da habit.

We can debate the way you charge the sales department in service all day long. But your theory of if we don’t charge them full retail or close to full retail, that they will just give it away in the sales department is old, tired and a worn out theory. By and large, we’re not working from cost up anything like we used to. Hello to the world wide web.

You cannot continue to rely on the sales department to prop up the service department. Sooner or later the folks in service are going to have to get better with how they sell and develop your customer base.

What compounds the problem is your pay plans. As long as you keep paying salespeople and sales managers on gross you are going to fight a losing battle. Changing pay plans is more about changing the culture in your store as much as it is about the pay plans themselves.

Can we agree that the pricing you put on the Internet has an impact on the amount of traffic that shows up? Aside from doing the right things when the customer shows up, how much control do the sales people and sales managers really have on gross profit? For sure it’s not as much as they used to have.

What if you changed the pay plan, took gross out of the equation and went to more of a one-price concept? Under that scenario what you charged in service and the need for packs would be irrelevant. The fact of the matter is you’re being pushed into less and less negotiating whether you like it or not.

If reconditioning and packs were not screwing up your “cost basis” then you could absolutely buy and trade for more cars and no doubt you would sell more because you would be in them right and have a pricing advantage over the competition.

I’ve asked this question a lot lately: What if you had a clean sheet of paper and started over from scratch; how would you do it in today’s world?   That’s all I’m gonna ask, Tommy Gibb

 

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