If you’re going to continue to make money, and hopefully make even more money, you will have to become more efficient.
Your processes will need to become more efficient. Your management team will need to become more efficient. Your entire dealership will need to become more efficient.
You will have to become more efficient when it comes to managing your expenses. And, you must become more efficient when it comes to speed and cost of your reconditioning.
There are many issues dealers are scrambling to deal with as we move into the most competitive environment in the history of the automobile business.
In order to do volume in used cars you need to have a “costing advantage.” By “costing advantage,” I mean what’s added to the car once you own it, which includes packs and reconditioning.
To have a costing advantage you have to re-think your packs (which usually gets down to pay plans) and most important, what you charge the used car department from your shop.
If you know your history, you know that the reason dealers added packs and charged full retail from the service department to the used car department was because sales managers worked from cost up.
In the good old days sales managers had control over gross so you could nail them with all the high charges you wanted. They still got the average gross you needed and you could put the money from Parts, Service and Packs in your other pocket.
This is no longer true as your sales managers don’t have control over gross as they once did. That’s why dealers are more and more becoming one-price dealers and saying “no” when the customer shows up and wants a discount.
If you’ve already dropped your pants on the Internet with a price designed to get them to show up then you have nowhere else to go.
So, without saying they are a one-price dealer, many dealers are taking a tougher stand as well as changing sales people’s pay plans to match their new found pricing and marketing strategy.
I predict within due time more dealers will become more like CarMax and not pay sales people or managers on gross.
Remember, as we move more toward a once-price concept the skill and pay level of the “desk managers” will be much lower than in today’s market. There will be more effort made to sell the store and the product with less effort on “penciling the deal.”
One of the things that you need to continue to evaluate and work on is the amount of time it takes for you to get a car on the lot and ready to go.
Sadly, most dealers do not actually know how long it takes. And even when they do, they turn a blind eye toward the problem. They let the proverbial tail continue to wag the dog when it comes to fixing the service timeline problem.
The second thing that needs to be addressed is the reduction of recon expenses. According to CarMax’s annual report they reduced recon expenses by $250 per car last year. How’d you do?
If you’re going to do more volume you need to have an advantage when it comes to getting cars through your system and the cost tied to doing so. You must become more efficient.
The pain of efficiency, or the pain of regret. You’re going to have one or the other and the cool thing is you get to pick. That’s all I’m gonna say, Tommy Gibbs