Ways to Immediately Increase Gross Profits

Ways to Immediately Increase Gross Profits

Some dealers have doubled their net income using these strategies.

Today’s profit slide is optional, not mandatory.

Earlier this year, we hosted a series of webinars for WardsAuto dealership readers about building gross profits at dealerships.

As the year progresses, we are continuing to see lower profit-margin reports by the publicly traded auto retailers as well as hearing of it from private owners.

It’s time to innovate, just like other retailers. We need to build our own grosses and not just leave this up to the OEMs. It’s not their job to make you money. It’s up to you.

Here are proven ways to begin building your grosses immediately.

Most dealers are just OK at advertising used cars. Many ignore certified pre-owned vehicle opportunities, missing out on profit cows. Why does a CPO carry more gross? Its exclusive. Build your exclusive inventory. Buy deep in a local need like used pickups. Everyone wants one.

Accessorize a demo. Imagine one adorned with the complete package of accessories. Your customers will see these upgrade options exist.

I’ve purchased more than 30 cars in my life and not once has a salesperson mentioned any accessory options to me. They leave it all to F&I, and by then I’m often shopped out. In retail, 50% of customers will up-buy when asked properly.

Market used vehicles vs. new vehicles by using total cost-to-own price comparisons. A used-vehicle buyer wants reliable transportation at a lower payment. They should always be buying an extended-service agreement.

CPO buyers love the car, but hate the front-end depreciation. Market CPO vs. new-vehicle prices. Add accessories and the CPO is still less expensive. Consider an “accessory credit” of $1,000 based on 100% retail markup.

Market “lease vs. buy” with monthly “cost-to-drive” lease payments for customers to get more car. This lease buyer should be buying accessories that add to their lifestyle and driving. These people don’t care about depreciation, they want the experience.

How can we lock in these good-gross buyers long term? One way is with a program that offers a trade-in value credit of $500 in three years. That would be in addition to the guidebook trade-in price. Jewelry stores do something like this. They want to see that buyer again. Don’t you?

Think about your average gross profit and how you can make moves to build it while delivering a great customer experience. I’ve seen some dealers double their net income using these strategies. Be creative and willing to tell a new and better story to your marketplace.

Adam Armbruster is a senior partner in the business growth firm Eckstein, Summers, Armbruster & Company located in Red Bank, NJ. He can be reached at 941-928-7192.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.