The Sublet Debate: That is The Question

OK, so maybe, it’s not something great philosophers spend hours debating on top of a mountain, but it is an important decision that affects the bottom lines of those of us in the buy here pay here (BHPH) business. And the “correct” answer to this mystical question may vary from dealer to dealer.

There are plenty of reasons NOT to sublet. It can be more expensive. It gives you less control. You give up a potential profit center. Perhaps you already have the necessary facilities and equipment. 

While all of those have merit to a certain extent, there are also some valid reasons that you might decide TO sublet, especially in the area of mechanical repairs. Let’s discuss a few.

Focus
Let’s face it. There are a lot of related areas to the BHPH business that we could be involved in, and if we had unlimited time and resources, we probably could make more money by doing so. The hitch in that plan is that we mere mortals do have constraints on how we spend our work days, not to mention trying to balance our business endeavors with our personal lives. Also, keep in mind that though there are some areas of common ground, most dealers will attest that running a successful service department often entails different skills than are involved in maximizing your sales and finance business, and in fact sometimes the two are at odds.

We made the decision when we sold our last new car dealership that we wanted to really narrow our focus to the areas in which we could most excel and be most profitable. In our case, that was selling cars, and providing financing for them. We would sublet anything else that didn’t directly affect one of those areas to an outside expert. Taking that approach can really help you dial in your operation, and motivate you to hone your expertise in the areas you feel most benefit your operation.

People 
Obviously, this is a two-sided coin. We enjoy providing good people in our communities with meaningful employment, but it is easy to get overstaffed when trying to manage a service department in addition to your sales and finance operation. Plus, as much as we come to care for our coworkers, and think of them like an extended family, like most families, the bigger it gets, the more refereeing that is required to keep peace.

Even if you sublet all reconditioning and after-sale repairs, it is still imperative to have a trusted manager internally to oversee the process, and continually monitor the relationships with the various shops to which you sublet vehicles. Subletting will allow you to operate your business leaner from a personnel standpoint, but having the right person in this key position is not an area that should be overlooked.

Liability
In our litigious society, this is more of a concern than ever. Quite honestly, with all of the regulations, laws and new requirements that our companies are expected to comply with, I really don’t want to venture into areas that can bring a whole new set of challenges beyond the ones we already deal with on a day-to-day basis. OSHA, DEP, Unionization, Higher Insurance Premiums, etc.? As far as I’m concerned, I don’t think I could stand any more regulation than we currently deal with. Not to mention, the prospect of employees and/or customers being injured at the dealership would be markedly higher if there are service facilities onsite.

The subletting decision is probably not a cookie-cutter choice that works the same for every dealership, and depending on your situation, either model could be successful. Perhaps one way to look at it would be if you already have the facilities and equipment, as well as background in the service end of the business, this could be an area that is a perfect fit for you to handle internally. However, if you aren’t blessed in those areas, it might be wise to consider subletting that aspect of your business, in order to better focus on the areas that can most improve your bottom line.

In the next issue, we’ll continue to consider the topic of subletting, as it pertains to some specific areas that are very relevant to BHPH dealers. Until then, I’m going to try to enhance my Culture Quotient by reading up on my Shakespeare…well, as long as I can find my CliffsNotes, that is!

Vol 4, Issue 10