|I started in the retail automotive industry when interest rates were 22 percent, customers were sparse and everyone was saying how bad it was. The dealer I started with had just hocked his home to invest in the deal and we lost over $200,000 the first three months in business.|
Well, we survived by not panicking and managing our store smartly. We developed a well-laid-out business plan to include all facets of the dealership, not just the almighty sales department. Our business is not rocket science but takes good management skills, a burning desire to succeed and sometimes having to make “tough love” decisions.
The service, parts and body shop (if you have one) need to be functioning at 100 percent capacity, including evenings and Saturdays if necessary. Dealers leave too much money on the table by not paying enough attention to the “back end” of their business. Service advisors need to take the time to thoroughly go through all the steps for each customer’s vehicle so they can not only can up-sell, but also create good customer relations. Are the hours per RO within your factory guidelines? Are techs standing around in the morning? Are service advisors cutting off work early in the afternoon so they can go home early? These are just a few of the questions that need to be asked in the service department.
Now for the “gravy.” As we all know, the sales departments (new, used and F&I) are the most profitable when times are good. In the times we are in now, we need to streamline these departments as much as possible. This means keeping new and used vehicle inventories as lean as possible. The finance department needs to make the best use of the customer’s time and try not to over-sell. Doing so can result in lost sales instead of additional income. Keep “add-ons” to a minimum and sell what is easily salable—GAP, extended service plans and maintenance products. Make sure used vehicles, trades or purchases are on the lot and ready for sale within 48 hours of arriving at the dealership.
It seems like the first place all businesses look to cut is personnel, which isn’t always the best decision. But if after careful analysis and efficiency improvements, it is necessary to cut personnel, however unpleasant, it must be done in all departments. That extra person here, extra person there can add up in not only noticeable expense, but also hidden expense, i.e., worker’s compensation premiums, excess unemployment taxes, etc. We are a people-driven business, from the switchboard operator and cashier to the service advisor and so on. We must make careful and deliberate decisions concerning personnel, as well as the total expense structure.
Overall, if we treat these dealerships as regular businesses and not as “auto dealerships,” even in times such as we now have, money can be made. When car sales return to some sense of normalcy, running an efficient business will result in even higher profitability for you.
Black Book’s final depreciation report of 2018 finds prices for used cars and trucks decreased by 2.7% and 2.3%, respectively, with declines among compacts, minivans, and full-size utilities setting the pace.