Gross profit continues to be an issue for dealers around the country. Many dealers complain that it’s due to the stress put on gross by the Internet and Internet pricing. With more and more dealers understanding that more than 80% of the people who shop a used car shop on the Internet, there will continue to be even greater stress on gross profit. Get used to it, it’s not going to change.
Since it’s a given that a large number of people show up at your door on a used car because you listed it at a good price, then it should be obvious that you cannot afford to continue to serve up big discounts after you’ve already dropped your pants on the Internet. Many dealers are using some sort of Internet or Market Value pricing statement that’s presented to the customer when they land in the store and have found it to be most helpful. (Made world famous by the Swope organization, Louisville, KY) But, even that does not cure the problem because both the salesman and the customer still tend to want to negotiate.
A question you have to ask yourself is how much focus and training are you putting on not giving up additional discounts once the customer shows up? It’s fundamental stuff. Fundamental processes, but the bottom line is salespeople and managers get lazy if they are not constantly reminded of what’s important. Over time your processes simply evaporate.
Your old timers like to complain they don’t have the margins to work with on used cars because you are giving it up with your Internet pricing. Just remember, most of your sales people are in sales because they like negotiating. So they still want to “do it.”
So, what’s GAP? GAP stands for Give Away Profit. Simply put it’s the difference between the Internet Price and the Transaction Price. You need to track this on every deal even if it’s not a lead that came in directly from the Internet. The odds are pretty good that your sales staff is quoting whatever you’ve got posted on the Internet as a starting point on most transactions.
Thus, you should track them all. I mean come on, how simple is that? All you have to do when you deliver a unit is to check what you have it on the Internet for against what you just sold it for. Track the amount given up and what percentage it is. Set up an excel spreadsheet for each sales person and one that shows the total for the dealership.
Once you start tracking your sales staff your grosses will go up. I can bet you that you already know who’s screwing it up. You know who the give-a-way artists are. Tracking GAP will provide you the proof and a roadmap to improvement. You can’t manage what you don’t know. Stop complaining, start tracking and watch your grosses go up. That’s all I’m gonna say, Tommy Gibbs