At some stage in the next twelve months, you are going to be faced with drawing up budgets for the next financial year. Simply taking last year’s performance and adding or subtracting from those numbers for your budget is really easy but mostly ineffective.
I detail below some critical inputs that should be considered when budgeting for your new vehicle Gross Profit (GP):
Once you have the volumes and model mix for your area, you need to calculate/estimate the selling price of your models as well as the GP% you expect per model.
What are you going to charge for PDI? This needs to be considered as part of your cost of sale.
With the above info, you will be able to calculate the dealership’s new vehicle volumes, average selling price and GP for new vehicles (first gross).
I like to break down GP into first gross, second gross and F&I gross:
Second gross consists of all additional products that are not finance or insurance related. This includes accessory sales, “3 in 1” sales, window tint, documentation fees, admin fees and any other products that you sell that are not finance and insurance related.
You need to consider model mix when determining your second GP as the potential for accessories on an LDV is way higher than it is for an entry-level car.
F&I GP is you finance commission, warranty sales and GP, maintenance/service plan sales and GP.
Lastly, you may want to include a provision for after-sales, advertising or any other type of provision that you deem necessary.
In order to pinpoint performance, I would recommend a separate line item for each of the components that make up first GP, second GP and F&I GP. It is then much easier to measure areas of performance and non-performance.
JLR reports growing demand for plug-in hybrid models, with global retail sales for the first half of the financial year up 29% compared to the prior year, as more customers use the technology as a stepping stone towards battery electric vehicles (BEV).
Zero Carbon Charge (CHARGE) called on the Minister of Finance, Enoch Godongwana, to announce measures in his Medium-Term Budget Policy Statement (MTBPS) to ensure that a transition to Electric Vehicles (EVs) will result in the reduction of carbon emissions in the country.
The ratio of used to new vehicles financed increased in the second quarter of this year, indicating a growing consumer preference for used vehicles, according to TransUnion South Africa.
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“Transformation in the motor industry is deeply complex, requiring innovative approaches to meet evolving standards and customer expectations,” says Craig Absalom, co-founder of The Cadet.
Heinie Boshoff’s (main photo) automotive career turned a full circle when he became the co-owner and a director of the Benba Motor Group in the Western Cape a couple of years ago. And he has never looked back after taking an opportunity presented to him after school and making the most of it.
Here are a few basic ideas that should have a positive impact on gross profit (GP). Most of you are familiar with them but knowing them does not mean they are effectively applied. These are areas that I believe should form part of your daily, weekly or monthly reviews.
