Dealers fighting margin compression need to mine for alternative ways to maintain their bottom line.
While sales and F&I are the more obvious profitability engines for dealerships, many people are overlooking another area of the business that can help mitigate the effects of margin compression and improve customer retention: the back office.
The back office puts dealers in the driver’s seat, letting them to increase process efficiency and transparency to boost profitability rather than relying only on more sales.
Improvements can start in areas like the registration and titling process, beginning with speeding the time it takes to receive titles for trade-in vehicles, which in turn, reduces holding costs and allows the dealership to move cars off the lot faster.
The biggest bonus? It can improve customer-satisfaction scores as well. This is a hidden but powerful profitability mechanism. But it involves overhauling traditional, inefficient processes and technologies.
For many dealerships, the current state of their back office is costing time and money. Consider this: Inventory holding costs average $32 a day. Assuming a dealership has 24 trades per month, that adds $9,000 to $13,000 in monthly holding costs, or $108,000 to $156,00 per year. (That is based on average industry timeframes for vehicle title release and vehicle payoff process of 18 or more days, as determined by Dealertrack data.)
Imagine removing that cost from the yearly ledger.
The standard title release process also long has been riddled by a lack of visibility into transaction details, ultimately leading to customer and dealer frustration. Currently, the title payoff and release process takes 12-18 plus days on average. This leaves folks anxiously waiting for two weeks or more when titles should be quickly processed.
How can dealerships address these registration and title bottlenecks?
It requires modernizing the back-office workflow by ensuring the right technology and provider are in place to streamline back-office workflow.
The latest technology enables titles to be released to dealers in as quickly as four to six days, 70% faster than the standard payoff and release process. The systems and tools you use could literally be the difference of thousands of dollars saved in holding costs.
Find a technology provider that can help deliver these efficiencies and access to 24/7 reporting and tracking of the loan and title process. This eliminates time-consuming back-and-forth phone calls for the dealership, lender and consumer.
Having complete visibility into the entire process ensures dealers know exactly what’s happening with every transaction, eliminating payoff surprises, delays and additional processing time.
This transparency is becoming more important than ever, with an increasing number of dealerships finding customers online and across state lines. What was once a simple, local experience has been transformed to reach a larger pool of car buyers.
However, with many states operating under different laws, registration guidelines or legal agreements, the registration and title process can quickly become a complex, disjointed process.
Having the right technology to accommodate both out-of-state and local car shoppers when it comes to registration and titling needs is essential for customer retention and satisfaction.
There are now several software solutions available that can help ensure every out-of-state registration and title transaction is completed accurately, efficiently and complies with the specific state regulations and requirements.
Electronic registration and title solutions or 50-state solutions (built on technology and service), for example, can help manage and ease the process to complete deals.
By implementing these innovative tools to streamline processes and more effectively meet the needs of all customers — whether they live down the street or over the state line — dealerships can raise customer satisfaction scores and cut complexities.
From lowering holding costs to improving customer satisfaction, boosting efficiency in the back office through the implementation of modern, easy-to-use technology could be a potent remedy for countering the effects of shrinking profit margins and plateauing car sales.
Kaitlin Gavin is vice president and general manager of Dealertrack Registration and Title Solutions.