How to steer your dealership through traffic in 2018 and beyond

Where is your dealership headed in 2018?

With the industry anticipating slackening demand for new vehicles, and only slightly higher demand for used-car sales in the coming year – and for the foreseeable future – it means one thing.

Dealers must look for other sources of revenue and profit to steer their businesses into the future.

“It’s time to … identify ways your dealership can continue to generate profit amid this post-peak environment and growing demand for a streamlined car-buying experience,” wrote Paul Whitworth in Look Back in the Rearview to Illuminate What’s Ahead for CBT Automotive Network.

110717 IL Personal touch important, even though car shoppers want digital options

So, here’s what he’s talking about to offset slower sales and margin compression.

A close look at last year’s results, when the automotive retail industry as a whole realized just 0.4 percent profit, “suggests that not enough retailers are taking advantage of other, perhaps more profitable, sources of income [than vehicle sales],” wrote Whitworth, an executive at Dealertrack.

Those areas are:

  • Fixed operations
  • F&I sales
  • Process improvements

Fixed operations

Citing Cox Automotive, Whitworth writes that “less than one in three service visits are being conducted at a dealership. This is a huge missed opportunity for renewable, reliable sources of income, not to mention customer retention and loyalty. And the failure starts at the point of sale.”

“Why not leverage the opportunity and make fixed operations an integrated part of the sales process. Sales-to-service turnover shouldn’t be an afterthought,” writes Whitworth. “It should be an imperative part of the sale of every new and used vehicle.”

F&I sales

“F&I sales have huge profit potential,” writes Whitworth, suggesting that for “every dollar a dealership generates through F&I, it retains about 70 to 80 cents.”

But that probably means you must streamline your F&I sales process.

“Offering optional add-ons, including extended service plans … by a separate department, in a separate office, after the close of a sale” creates a costly disconnect, Whitworth writes. “But some dealerships have started to implement a sales-F&I hybrid approach” guiding the whole deal.

Process improvements

This includes better employee training, better technology and better internal processes.

“In the car business, time is money, so find ways to reduce holding costs, make your employees happier, and your technology more accessible, integrated and user friendly,” he writes.

“You’ll find that a few changes and improvements … will go a long way toward increasing profits and making your business more appealing to customers and employees, alike,” writes Whitworth, making it “the starting point” for a stronger business in 2018 and beyond.

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