ACAR Report Notes – June

June 8, 2020

With early results in, it looks like May is showing a strong rebound. New inventory levels are very low, so make sure you are getting all the gross.

As the country opens and PPP wraps up it is time to evaluate our staffing needs thru the end of the year. We suggest building to what an average month will look like.

Furloughed employees – who and when to bring back
PPP wrapping up – no longer necessary to manage headcounts and compensation
With high unemployment a good time to upgrade your staff
Re-Design Pay Plans – sales, gross and CSI components
Re-Distribute duties
Re-Align workspaces, counters, and offices for efficiency
Eliminate mediocre employees (unless legal reasons prevent)
In discussion with dealers, the new hours have been very beneficial and are changing staffing needs. Be very thoughtful as you begin increasing hours. If it does not generate gross or market share to cover those additional costs, do not change those hours.

Also, with changes in processes and new technologies implemented in the last two months there are shifting expectations. For example, salespeople traditionally need to average at least 11 units per month. Should that now be 15 or 20 with more appointment setting and at home deliveries? Is it time to try a new approach?

List duties by position so you can see if the appropriate person is responsible for those duties. I have heard many stories about indispensable employees and once they were furloughed, it turns out they were not needed in the first place.

As you break out responsibilities verify that highly compensated employees are only doing high level work. If someone at $14 an hour can perform the duties of an $8,000 a month person, they should be performing those tasks. For example, an “A” tech should not be working on reconditioning. By moving duties to the appropriate position, it will free up managers to be better utilized or allow you to work with fewer

As our dealers have been forced to change, they are seeing surprising results and will be changing processes significantly going forward. Make sure you are making a To Do List to keep implementing these changes. As you work thru your new staffing needs please use the Re-Focus Profit Planner for the listing of your employee head counts and compensation. Also, we have templates to inventory all positions in the dealership
and compare back to where they are recorded on the statement, you may be surprised. Just give us a call at 1-888-409-2227 if you would like to discuss.

May 2020 – Auto Dealer To Do List

Based on April changes, the decisions you make in May, will affect the future of your dealership. The last six weeks have provided a completely new focus on how to move forward.

May 6, 2020

Gross, Market Share & Complete all Tasks.

Gross Margins:  With limited sales you must maximize gross margins. 
Gross per unit:  Overhead expense new & used per retail unit usually averages $1,000 per unit.  If you sell 20% less units, you will need $250 more gross per unit and if you sell 50% less units, you will need $1,000 more gross per unit just to cover overhead. 
During the crash of 2008, it took many dealers six months to return to profitability, which usually required a gross increase of $1,000 per unit.  In March 2020 we saw many dealerships increase gross per unit.  Gross is driven by inventory, location, and your vision.  As grosses go up, we almost always see either an increase in market share or no change. 
Market Share:  Selling processes and marketing has shifted, you must be on the forefront. 
Monitor your Competitors:  The dealers increasing market share will increase their turn and earn, which is imperative with scarce inventory.  In the last week, I have talked with 3 different dealers that are worried about running out of new inventory.  Which is another reason to maximize gross.  

New Sales Process:  Everyone is in a different stage of setting up on‐line selling and home delivery.  Make sure your team is fine tuning your procedures after each sale and delivery to make sure the process is perfected.  Innovation is key in this market. 

Market Share is Driven by Inventory:  In the last 28 years watching market share every month, true changes only occur when inventory changes, not advertising.  This occurs after tsunamis, hailstorms, new facilities, ownership changes and hurricanes when manufacturers change allocations. Do all you can to make sure you have the correct inventory.  
Complete all Tasks:   
Lost Expertise:  With your dealership operating with fewer employees, make sure those tasks they specialize in are completed.  Whether ordering inventory, updating websites, following up with customers, ordering supplies, collecting receivables, paying taxes it is imperative these tasks are completed.  From my experience, whenever warranty receivables start increasing along with overaged, it always relates to a change with the person, which turns into an expensive problem. 

New Duties:  We are all working on additional duties and processes during these times.  Current employees are now doing the work of additional staff members.  It is imperative that all staff continue to complete their current tasks in addition to those of others. 

Dealerships will be much more efficient going forward, but to be profitable now, we must optimize gross.  Gaining or retaining market share in May will ensure success six months from now, because we will earn the inventory.   Making sure all the tasks that were assigned to furloughed employees are completed, will have a huge impact on the bottom line.  These are just a few items, that will make us successful going forward. 

Forecast Essentials – It Costs $2,400 to Sell a Vehicle

April 23, 2020

Do you know how much it costs to sell a vehicle in your dealership? Very few dealers realize that the average cost to sell a vehicle is $2,400. In my discussions, I have found that most managers and dealers assume the cost to sell is $600 - $1200.
To calculate your cost to sell, take your total new & used expenses on your factory financial statement and divide by total retail units. Depending on the manufacturer, this number has already been reduced by advertising and floor plan credits.

ACAR Articles

published in Auto Success Magazine

We are passionate about the automotive industry at ACAR and it is our goal to stay informed and educate dealers about what is current in the world of autosales to maximize profits and save time.

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State of the Industry - September 2016 YTD

November 01, 2016

I just finished a webinar for DealersEdge on budgeting and in preparation I completed an analysis of all of our dealers thru September 2016. 
The numbers were very interesting, so I wanted to share them.  In total our dealers are less profitable by about 10% for Domestic and Import and our Luxury dealers are down 28%.

As I dig into the numbers for Domestic and Import, overall gross is up 7%, new volume up 5% and used volume up 11%, but our selling expenses are up 11% and overhead is up 10%.  The increase in overhead expense was the biggest surprise.  It does support what we have been seeing everywhere, new & used gross per unit is down, therefore there is not enough gross to support the additional expenses.

As you build your forecasts for 2017, look for ways to increase gross while controlling expenses.  If we have a down turn, it will throw a number of dealerships into losses.  Overall, front end gross is going away and F & I is growing, but the additional F & I gross is just covering the increased employee cost over the last two years.  Gross doesn’t need to go down, we still have a number of clients that get strong gross and have strong market share.  These are not mutually exclusive; you just have to build a culture in your store on the importance of gross.  It takes a while to make that change, but it is well worth it.  If you take out your 2016 ACAR Report and see you are making less after making all those additional sales, it is disappointing.

An example of strong gross is our Toyota dealers.  Not only is new volume up 5%, but new gross is up 7%, and Toyota has the new DAP income which if included in new car gross, would cause gross to be up 13%.  This is just one example; we have a number of dealers still excelling in gross. 
In general, items that help increase gross are:
  • Having the correct inventory
  • Looking at front end gross separately from F & I gross and manufacturer income
  • Having an understanding of how much it costs to sell a car (usually at least $2,000)           
  • Realizing that you have a product people want and that it isn’t always about price
  • Training your sales staff and managers the value of the vehicle and your dealership
  • When gross goes up, usually market share goes up, because morale goes up
As we look at the Luxury brands a big concern is overall service gross, which is only up 1% and many of the brands are down.  In contrast, Domestic and Import brands are up 7% in service, which is very important if the market turns.  Used sales are up 10%, versus new sales only being up 1%.  Overall gross is down 1%, selling expenses are up 3% and overhead expenses are up 5%.  Not a good recipe for increased net profit.
In summary, there are a lot of positives in the market, but as we look at 2017, make sure you are not leaving profits on table.  A fine-tuned operation is key to attacking a down turn.

We will be sending our annual Profit Planners this month.  Be sure to give us a call if you have any questions at 1-888-409-2227.