There was a time when floor-plan money flowed to new-car dealers. Dealers and lenders shared complete faith that manufactures and the retail market were the belt and suspenders of inventory values.
There was a time when blue chip, meant General Motors. Yes, there was a time…
Today, we are falling into the abyss, those safety nets torn, our manufacturers are hemorrhaging losses and the economy faltering; our lenders are replete with doubt, our dealers depleted of faith.
But, as bleak as all that sounds, no one believes that the future of America will come without personal transportation a part of it.
So, the only thing we're all debating is how cars will be distributed, what brands will they be and how often we'll replace them.
Some of my happiest memories as a child include going to my father's car lot to be with him while he worked. To consider that there might be a car business that doesn't include dealers is hard for me to imagine. It's painful.
But, we're seeing a lot of things these days that once were impossible to fathom. Consider these 10 points as you decide whether we're just in a slump or on the verge of real change.
- There is no sense to holdback; it's always been a sucker punch. Asking a lender to risk 103% of the real cost of inventory (assuming 3% holdback) on the hope that no one will notice, not the customer, the salesperson, nor the floor plan lender, is pure arrogance. Invoice should be the cost of a vehicle, not the starting point of retail.
- Charging dealers more than fleets erodes retail trust. Fleet discounts steal residual value (and credibility) from dealers and everyone they do business with.
- Sub-vented too-low-to- be-true interest rates are lies. The cost of money is the cost of raising the money plus a yield. No one lends money without requiring fair return. A con game is buying down the interest rate to make customers think there is a deal under one of the shells. Worse are manufacturers' schemes to mark up the rest of the deal to cover a false rate.
- Palatial facilities don't make deals, they burden them. Expensive facilities factor in both the mind of the customer (knowing they're paying for the opulence) and the pricing of the dealer (having already paid for the opulence). Customers want a pleasant experience and value pricing. They don't want to pay extra for designer furniture in a multi-million dollar showroom. Only people (manufacturers) spending the money of other people (dealers) think otherwise.
- Factory imposed programs that are unfair and heavy handed cannot be separated from unfair, heavy-handed handling of customers.
- Dealer information systems designed around forms printing and the balancing of debits and credits rather than the measurement of cash flows and the prediction of profitability are not dealer information systems, they are manufacturer and government information systems.
- Accountants who charge for business guidance based on feeding you your own numbers laced with industry gossip are not advisors.
- Solutions come from a diversity of opinion. Some of the most talented factory staffers I've known were passed over because they didn't follow failure well.
- Pricing is not based on how much you need to make, but how much customers are willing to pay. Manufacturers who vary their prices to dealers as often as the marketplace dictates are destined to make fans for life of their customers and dealers.
- Loyalty is built on mistakes. If you want to understand why people become loyal to a brand or dealership, ask them about how their problems were handled.
Peter Brandow is a veteran dealer in Pennsylvania and New Jersey.
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