Dealers Find Ways to Make Money

By Andrew Brown

When it comes to boosting profits at the dealership, it’s all in the presentation.

“We offer customers a menu of packages, so they can pick  and choose whatever they want,” says Alla Tripolsky, finance  director at Osborn Automotive. The Lakewood, Colo., dealership  starts by enticing car buyers with maintenance products. “If  the customer prepays for oil changes, they get a discount. It  certainly helps with customer retention,” she says, because customers who return for maintenance establish a relationship with the dealership.

Last November, the dealership sold 108 cars, 68% of which were tied to maintenance products. “We guarantee ourselves that 74 of those 108 customers will come back,” she says.

“If we can get them in for an oil change, at some point theyhave to change that air filter,” she says. “They’ll have to change those tires.”

SELLING SERVICE

The maintenance offerings often have a trickle-down effect. If a customer has a particularly large bill or needs a new car, the salesperson can educate the customer about the dealership’s financing programs. Plus, the maintenance coverage is financed into the loan and has an added benefit of facilitating warranty sales. “We usually couple the maintenance products with extended service contracts, which help sell the service product,” Tripolsky says.

Osborn Automotive’s integrated sales and service process has paid off: half of the dealership’s business comes from repeat customers and referrals, she says.

ORDERING OFF THE MENU

Saturn of Lancaster uses the menu approach, too. Rather than just quoting a payment, the Lancaster, Pa., dealership relies on its salespeople to present finance and insurance options. “If you have a menu in front of [customers], you can talk them through it,” says John Anastos, the dealership’s F&I manager. “When a customer sees a description of what they get, the process is easier.”

The dealership, which sells about 90 cars per month, utilizes technology provider DealerTrack to create personalized menus for each customer. “You can show four options, you can show three options, multiple terms, and multiple interest rates,” Anastos says. “You can make it exactly what the customer is looking for.”

Since implementing the system in 2005, profits from ancillary sales have shot up 60%, he says.

Meanwhile, Osborn Automotive uses a similar software solution called MenuVantage. “It’s customizable, and it allows us to present 100% of the products to 100% of the customers,” Tripolsky says.

MINDING THE GAP

Among specific products, guaranteed asset protection (GAP) is one of the most profitable for dealers, especially as loan terms lengthen.

“I’m seeing more 72-month as opposed to 60-month loans, so due to that, GAP insurance is becoming more popular,” says Orlando Cadiz, finance manager at Phoenix Motor Co. The longer terms increase chances that cars may be totaled.

“It has a huge value to customers, and it’s a very easy sell,” Anastos says. “It’s not an expensive policy. Selling someone a $400 investment on a $30,000 loan is not too difficult.”

Plus, the longer the loan term, the higher the price for GAP coverage.

Some states restrict the amount that dealers can mark up the GAP coverage they sell, but not Pennsylvania, Anastos says. The average markup could be anywhere from 50% to 100%.

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