On an almost daily basis, I speak with auto dealers across the country and hear the steps they are taking to deal with this current economic downturn.
Yes, there are challenges and yes, in my opinion, there will continue to be challenges throughout this year. But challenges bring opportunities; opportunities that make us stronger. As a mega-dealer recently said: “The good get to great during the toughest of times.”
Let me tell you about three dealers I spoke with recently.
One dealer says he was glad that, during the past couple of years, he had taken the tough steps necessary to get his overhead in line with the organization's current gross-profit production. Because of those actions, his net is actually better than during the same period in 2007.
The second dealer says his getting into the lesser expensive used-vehicle market last year is paying dividends and has allowed an increased net this year.
The third dealer says his focus on driving customer-pay service department business into his three dealerships has helped offset the decline in vehicle sales. That service business, coupled with a focus on expense control, has resulted in an increased net in all three stores.
There are hundreds, if not thousands, of success stories like this in our business.
Yes, most of us are heavily dependent on the new-vehicle franchise for many reasons, but a downturn in new-vehicle sales doesn't necessarily translate to a downturn in net profits.
It doesn't if you have been:
- Proactive in right-sizing from a personnel and expense standpoint.
- Proactive in attacking the used-vehicle market with the right vehicles.
- Focused on growing your parts, service and body shop business.
We have just completed and compiled the first quarter 2008 NCM All-Group results. For comparison purposes, following are selected first quarter 2008 operational statistics from our NCM database: This isn't an easy business, but car dealers are survivors. Not only will we survive during these economically challenging times, we will get better. Knowing this industry as I do, getting better is what we do best and enjoy doing the most.
Tony Noland is the president and CEO of NCM Associates, Inc. He is at [email protected].
Questions or comments about this column? Send us an e-mail at [email protected].
|Benchmark® - Expense Category As % Gross||Highline||Import||Domestic||Us|
|Floor Plan (Net) As % Total N&U Departmental Gross||1.9%||2.5%||2.9%||%|
|Net Advertising/Promotion As % Total N&U Departmental Gross||7.5%||10.5%||10.1%||%|
|Total Employment Expense As % Total Dlrshp Gross||33.4%||34.8%||37.3%||%|
|Memo- Employee Benefit % Employment Expense||25.4%||26.7%||27.1%||%|
|Parts/Service Policy Expense As % Total Dlrshp Gross||0.8%||0.7%||0.7%||%|
|Memo - Fixed Coverage||90.7%||73.9%||74.2%||%|
|Gross Per Employee Total Dealership||$11,611||$9,185||$8,078||$|
|Gross Per New & Used Combined Employee||$18,139||$12,450||$12,733||$|
|Gross Per Service Employee||$7,403||$5,783||$5,021||$|
|Gross Per Parts Employee||$22,279||$13,733||$12,969||$|
|Gross per Body Shop Employee||$5,472||$5,379||$4,962||$|
|Gross PNCR (Pre-incentive)||$2,677||$1,299||$1,598||$|
|Gross PNTR (Pre-incentive)||$2,616||$1,420||$1,833||$|
|Net F&I (Pre-Comp) PNVR||$924||$875||$948||$|
|Net F&I (Pre-Comp) PUVR||$957||$871||$841||$|
|Wholesale Gross PUV||$75||$50||$17||$|
|Days' Supply New Car/ New Truck||51/34||64/50||63/75||/|
|Days' Supply Used Car (cost)||51/34||64/50||63/75||/|
|Days' Supply Used Truck (cost)||40||53||52||#|
|Days' Supply Parts||45||48||55||#|
|Contracts in Transit — Days||3||3||3||#|