The pullback in leasing is complicating the battle against the sales slowdown, says GM dealer Jim Bradley of Ann Arbor, MI.
But the veteran Pontiac-Buick-GMC and Saturn dealer, while agreeing that the downswing is the “No. 1 topic when dealers get together,” says his 27 years of dealering have taught him to refocus on keeping fixed absorption of costs up to a 75% level and elevating bargains for used vehicles.
“As a minority dealer,” he adds, “I offer this advice to many of my less experienced colleagues: Keep your inventory costs under control and promote your service and body shop when new-vehicle sales ease off. That's how to survive, because the customers may hold off on buying a new car but they still need to keep their present vehicle in shape or may go for a pre-owned.”
As for GMAC's downward revision of lease residuals, that has hurt a dealer who had a 50% lease penetration. “We have to try to sell financing,” says Bradley, “which means higher payments, but if competition goes back to lease subsidies, we'll simply have to follow suit somehow.”
Meanwhile, he's doubled the size of his Saturn showroom and service department. His wife Juanita Bradley, who runs the Saturn store, felt the original building was too small to handle the expanding Saturn owner base.
Dealers should keep their facilities fresh-looking and large enough, he says, “or customers will stay away. We updated our Buick-Pontiac-GMC building 10 years ago and it looks like we just built it.”
A director of the GM minority Dealers Association, Bradley is concerned that the influx of black, Hispanic and Asian dealers into “promising” dealerships might be abating as the sales downturn goes on.
“Too many new minority dealers were located in dealerships whose markets were fading,” he says. “The answer to this is to involve top management in the program to increase the minority-dealer number and at the same time profitable.”