What Options Do You Have?

The odds are pretty good that gross profit from new car sales isn’t going to get any easier. There’s a greater supply of inventory hitting most lots than in recent years. As supplies increase there will be more incentives put on the table and even more pressure to “turn and burn.”

As inventories increase, the greater the heat there will be on dealers to turn the inventory. That pressure will become magnified with the demand from the manufacturers to capture market share.

Dealers will feel the stress of being put on probation by their represented franchises. Maybe it’s not called probation for your brand, but we all know the heat the factory can put on us.

Floor plan interest rates may be headed up, which will add to the angst of many.

Every day the consumer gains an advantage, as technology is added to assist them with their price search of new vehicles.

The stress to turn more new units will cause more and more dealers to put new car prices online. Dealers will compete that much harder via pricing, and grosses will continue to suffer.

Many models will be sold for zero gross with a heavy reliance on F&I, doc fees, trades, etc. Many dealers are already selling new cars at cost or below.

Most dealers are tuned into fixed operations and many are already at full capacity due to facilities and the lack of qualified technicians.

The best bet for many of you is to improve your used car business.

If you don’t believe that to be true all you need to do is look no further than the movement of the public companies such as Sonic, AutoNation and others. You will see that they are ramping up their used car operations by setting up stand alone operations, much along the same model as CarMax.

Improving your used car business has many challenges tied to it; none any greater than improving front gross profit, which isn’t likely to happen given the state of used car pricing online.

Your best opportunity to improve your used car business is to improve your volume. Clearly understand that to improve your volume means your average gross profit is likely to go down.

Keep the following in mind:

You cannot spend average gross profit.
You can spend total gross profit.

That’s all I’m gonna say. Tommy Gibbs