Where are your new-vehicle profits hiding?

Within each department or process, the gross profit of that process or department can be made up of many components and each of those components should be managed for the overall GP to be where it should be.

Firstly, identify the components that make up the GP of a department and include them in your budget and management reporting.

Vehicle GP – selling price, cost, PDI, Recon, provisions, factory-fitted accessories or options, discounts, over allowance, OE incentives.

Accessory GP – fitted by the dealership – selling price, cost.

Delivery Fee/Documentation Fee/Admin Fee GP – costs may include fuel, gifts, out of town delivery, number plates.

L&R GP – selling price, costs of L&R, costs of L&R agent.

Warranty GP – selling and cost prices – can distinguish between OE and in-house/aftermarket products. Could also be commission only depending on the vendor.

Maintenance Plan GP – as per Warranty.

Service Plan GP – as per Warranty.

Top Up – as per Warranty.

Tyre Warranty – as per Warranty.

Dent Warranty – as per Warranty.

Bank DIC.

Each dealership will have its own interpretation of these components and how to account for them but each of them should be visible to management so that performance can be monitored.

When budgeting for these items, the following should be considered:

Type of vehicle – LCVs will naturally include more accessories than passenger cars;

Type of client – fleet/tender/rental will influence the products that will be sold;

Anticipated OE product mix – base-line vehicles will have more potential for additional products than “full house” vehicles.

One also needs to consider what the OE model mix and volumes are as well as what access you will have to those models – you can’t plan to sell 50 ‘Model X’s” per month when the OE will only have 20 available.

In summary, your GP is “hiding” in the detail.

Dealerfloor (dealerfloor.co.za) and I will be publishing regular articles on dealership efficiency. I am really looking forward to sharing ideas with you. Join the conversation by sending a WhatsApp to 082-776-1887 to be added to our group.