“Through the Eyes of the Dealer 1.0”
1
Priorities of this Session
Position the Auction Academy graduates as a valuable, NADA
UNIVERSITY trained, resource to their automobile dealer clients
•
•
•
Add value to the attendees by increasing their knowledge of the
retail automobile business
Understanding Dealership Operations Through the “Eyes” of a
Dealer
Key Issues
– Examine critical dealership processes
– Identify the functions, motivations, and conflicts of key dealership
employees
– Clarify the role of the Manufacturer
2
Current NADA Priorities
Regulatory & Legislative
• CAFÉ
– Currently = 27.5 MPG
– 2016 = 34.1 MPG
– 2025 = 54.5 MPG
• Est +$3000 per vehicle
3
Current NADA Priorities
Regulatory & Legislative
• CAFÉ
− Currently = 27.5 MPG
− 2016 = 34.1 MPG
− 2025 = 54.5 MPG
• Est +$3000 per vehicle
• CFPB
− Consumer Finance Protection Bureau
“Disparate Impact”
“Constraining Discretion”
4
Current NADA Priorities
Regulatory and Legislative
• Recalls
• Rental and Loaner
5
Promotion of the Franchise System
6
7
8
9
10
5
What are the practices of new
car dealers that are mutually
beneficial to them and the
auction industry?
What are the practices of new
car dealers that are NOT
mutually beneficial to them and
the auction industry?
2
Tables 1, 3, & 5
Tables 2, 4, & 6
11
Measuring Success
Sales
Gross
Net % of sales
Net
12
Net as a % of sales
Industry
Net as a % of Sales
Big Oil
25%
Insurance
18%
Beverage
18%
Publishing
17%
Entertainment
15%
Higher Education
12%
Telecommunications
11%
Agriculture
10%
Utilities
9%
Healthcare
7%
Banking
7%
Electronics Retailer
5%
Grocery Stores
3%
Gas Station
2%
New Car Dealership
2.2%
13
Measuring Success
Gross % of sales
Sales
Gross
Net
14
Gross as a % of Sales
The highest gross profit as a percentage of sale item a
dealer can sell is:
a) A water pump
b) The labor to replace the water pump
c) A recently traded used car
d) A dealer transferred new car
15
Most Profitable
Which department consistently generates the largest net
profits?
–
–
–
–
–
New Vehicles
Pre Owned Vehicles
Service
Body Shop
Parts
16
17
Gross as a % of Sales
• Dealership average = 13.1%
18
Gross as a % of Sales
Department
Service
National
Average
~70%
Parts
~38%
New
3.68%
Used
12.55%
Guide
Where to look
70%
-Discounting
-Quick lube %
-# of “A” tech
38%
-Wholesale
-Discounted…internal
rate
-Quick lube
19
Used Car Department
What are the indicators of a
struggling used car
operation?
What are the indicators of a
successful used car
operation
20
Pre-Owned Department
• What are the benefits for strong pre-owned department
on:
– New Car Department
– Service
– Parts
21
Measuring Success
• Typical Dealer
–
–
–
–
Per unit gross
# of Units
Departmental total gross
Departmental Net
• NADA Guide = 20% of gross
22
GROI – Gross Return On Investment
Gross as a % of
Sales
GROI
Turn Rate
X
=
23
GROI – Gross Return On Investment
• If a $10,000 vehicle is in stock for 1year and generates a
$1,000 profit… what is the GROI?
• What if sold after 90 days in inventory?
• What if sold after 30 days in inventory?
24
Measuring Success
 What additional factors need to be considered in the
evaluation of the profitability of the Used Car department?


_____ inventory
Other Income and Deductions
 What are the contributions of the variable departments to this
account?
 Packs
 What are packs?


Hard Pack
 Accounting charge to a vehicle
 Typically credited to: ______________________

___________________
Soft Pack
 Part of a pay plan to reduce commissionable
amount
25
Measuring Success
• Advanced dealer
– Total gross
– Aged inventory
• Guide: % of units under 30 days
– Minimum = 50%
– Very Good = 60%
– Excellent = 70%
– Market penetration
• % of used vehicles sold by dealer in local market
– Inventory turns
– Net
26
Measuring Gross
– Is $4,200 per unit gross a good job?
27
Turn
Learning Objective
Evaluate the effect of focusing on inventory
turn rate
28
Breakout
Improving Turn Rate
 What are the critical processes
to improve turn rate?
 List them out
 Number them in order of
importance
29
Improving TURN
Stocking “In-Demand” Inventory
30
Barriers to selling makes that are not sold new….
31
Identifying In Demand Inventory
Pre-Owned
• What data sources are available to assist dealers with
stocking decisions?
– Dealership sales history
– Market data
32
Identifying In Demand Inventory
• Limits and benefits of Focusing on Dealership Sales
History Data?
Does not reveal vehicles that were
never retailed by the dealership
33
Market Data
• DMV Registrations
34
Market Data
• What is missing from this data?
– Supply of similar vehicles in my market area
– Pricing
35
Market Data
–Online Classifieds
– https://dealers.autotrader.com/
– www.dealers.Cars.com
36
Market Data
• JD Power – “Power Dealer”
–Fellow Dealer Data
– Participating dealers sharing sales data
37
Improving TURN
Sourcing Inventory
38
From Existing Customers
• How can a dealer source inventory from existing
customers?
– CRM/DMS Tools to find cars
• Searching database for customers with equity in
trade
– Service lane
– “Vehicles Needed” board in service lane
– Generating appraisal / book value report to be left in
vehicles after servicing
– “Exchange” Carfax for written appraisal
39
From the Public
• Online classifieds
– Spiff to salespeople
• Each vehicle purchased counts as a unit towards monthly
volume bonus
• Advertise
– “We Buy Cars”
• Print ads
• Internet – SEO / SEM
40
From the Auctions – The new reality
41
Market
Wholesale
Price Dealership Can Pay
$
Front End Profit Expectation
Prep and reconditioning
Hard Pack
Transportation
42
TIM
What are the best practices for using TIM to
acquire inventory?
Page 20
43
Improving TURN - Pricing
Learning objectives:
-Assess and evaluate pricing strategies
-
44
Cost Plus Strategy
• Inventory pricing is based on
the dealer’s acquisition price
• “Sales staff will generate the same gross profit
regardless of cost”
• Retail price is determined by adding the mark-up to cost
– Typically a set amount….. $3,000 - $6,000
• Determine “Sweet Spot” for Packs
• “The customer pays for it”
• Retail Markup on Reconditioning
• “The customer pays for it”
45
Market
Wholesale
Slow
Transaction
Zone
Price Dealership Can Pay
$
Front End Profit Expectation
Prep and reconditioning
Hard Pack
Transportation
Quick
Transaction
Zone
46
Retail / Re-price / Wholesale Timeline
Day 1
Day 2-3
Days
Active
2 – 45
“Price Check” Phase
Day 31
Day 31-45
Day
47
Hard Turn – Aging Policy
How can dealer achieve management “Buy In” to a Hard
Turn policy?
– Incentives
– Penalties
48
Improving TURN - Reconditioning
49
Reconditioning
• Are the Used Car manager and the Service manager?
– Working together
– Working each other
• Critical Process = Turn Around Time
– Why does it takes longer?
– How can this process be improved?
50
Reconditioning
Solutions
– Not enough techs?
• Request / demand volunteer techs to stay late
– Penalty for delay past deadline
• 10% of bill per day?
– Sublet?
51
Reconditioning
• Solutions
– Immediately launch to internet
• If necessary… clean up and photos before recon
52
Carmax Model – Fiscal 2015 3Q
• No reconditioning markup
• 143 locations
• plus 10 to 20 more in 2015 -2016
− 433,000 retail @ 2172 PVR front ($435 PVR back)
• Does not include CAF finance profits
•
41% penetration @$628
− 286,000 wholesale @ $949
• via onsite auctions with a 96% sales rate
• Avg sell price: $5277
− 6.8% Net to sales before Tax
• 40% of inventory is direct from individual owners
53
Carmax Model – Fiscal 2015
• Trade is purchased even if no sale is made
• Ups measured by ‘Beam Breaks’ at entrance
• Use RFID’s and bar codes to track inventory
• Customer given option of checking vehicle or credit first
• After demo, vehicle is parked in assumptive “sold line”
• 20,171 employees-Fortune 500 Best Places to Work
• 5,121 salespeople: 12 unit / mo avg; volume bonuses; no
gross profit incentives, Serv contract bonus; 45 hours / week;
1 Sat / month off. Handle delivery paperwork except for spec
finance
• Repricing based on data and # of test drives
54
Carmax Model – Fiscal 2015
• 5 day money back guarantee
• Aged units moved to hot spots daily
• 80% customers hit their website
– Over 12M visits per month
− 57% is mobile
• Because of the pricing discipline afforded by the
inventory management and pricing system, generally
more than 99% of the entire used car inventory offered
at retail is sold at retail.
55
Improving TURN
In Dealership Appraising
56
Appraising
• Question
– Should a dealer pay more for a vehicle at the auction than a
vehicle coming in on trade? Why or why not?
57
Appraisal Trade Rate (look to book)
• Percentage of appraisals that are actually traded for
58
Measuring Success
Look to book
Traded
looked at
Trades taken in
%
Dealership
320
160
50%
Used Car Manager
200
100
50%
New Car Manager
50
35
70%
Asst. Used Car Manager
50
20
40%
59
Measuring Success
Look to book
Traded
looked at
Trades taken in
%
Dealership
320
160
50%
Salesperson 1
30
15
50%
Salesperson 2
20
14
70%
Salesperson 3
12
5
40%
60
Vehicle History Report
–Is a report part of your process?
–What are the additional uses?
61
Improving TURN
Wholesale
62
Bumping Trades
• You dropped a bomb on the used car department and
appraised a vehicle for more than it is worth. Now what?
63
Trade Ins
Year to date
Wholesale Ratio - Units
Financial Statement
÷
Wholesale Used
=
Total Used
(wholesale + retail)
Wholesale
Ratio
64
Wholesale
What are the consequences of demanding a
reduction in aged inventory coupled with expecting
a near $0 wholesale loss?
–“Pairing Up”
–“Swaps”
65
Wholesale
Wholesalers
 Do you allow wholesalers?
 Drawbacks
 Can ‘influence’ your managers
 Sell cars that should be kept
 Lower appraisals
 Funds not always “firm”
 Benefits
 Firm buy bids
 Inventory specialists
 Know where to go
66
Slide Guide
• Frozen Capital
– Cash tied up in excess inventories or receivables
• Inventory Trust Position
– Floor plan is paid off on sold vehicles
• LIFO
– Last In First Out – Tax deferral strategy
•
•
•
•
Net Profit as a percentage of sales
Net Worth
New Vehicle Dept. Breakeven Point (units)
Parts Obsolescence (obso)
– Parts inventory aged over nine months with no demand ( guide=
less than 5%)
67
Slide Guide
• Service Department Proficiency
• Service Sales Potential & Retention
– Number of vehicles in operation (6 years or newer) for a given
brand and market area X 12 hours per year X overall effective labor
rate
• Total Absorption
– Percentage of dealership expenses covered by Used, Service,
Parts, Body shop (guide = 100%)
• Fixed Absorption
– Percentage of dealership expenses covered by Service, Parts,
Body shop (guide = 75%)
• Units in Operation
• Variable Expense
• Used Vehicle Days Supply
68
“Front End – Back End”
Two Meanings
– Parts of a Car Deal
• Sale of Vehicle (Front)
• F & I (Back)
– “We made $800 on the back”
– Parts of Dealership
• Sales (Front)
– “Variable”
• Service (Back)
– “Fixed”
» Includes Parts and Body Shop
69
Service
70
Service
• Many dealers are in business primarily for the service
business
• It is a rare dealer that is successful without a profitable
service department
71
Fixed Absorption
% of dealership expenses covered by service, parts, and
body shop gross profit
NADA guideline
=
75%
Current National Avg.
=
56%
Top performing
=
100%+
72
Total Absorption
% of dealership expenses covered by service, parts, body
shop, and pre owned gross profit
NADA guideline
=
100%
Current National Avg.
=
78%
Top performing
=
110%+
73
The 4 Inventories
A dealership has 4
inventories to sell:
1. New
2. Used
3. Parts
4.
74
Measuring Technician Performance
• Efficiency
– Flat rate hours sold vs. clock hours it actually took
• Productivity
– Clock hours spent working vs. clock hours available
per day
•
Proficiency
– Flat rate hours sold vs. clock hours available per day
75
Measuring Proficiency
76
Parts Department
77
Parts Department
Highest Net Profit Center (as % of sales)
– Small group of employees
– Less square footage
– Low cost of operation
78
Parts Department Gross Profit % of sale
Customer Pay
Warranty – per OEM
Internal
Retail Counter
Wholesale
Blended
40%
25%-35% (generally)
35%
40%
25%
35%
79
Types of Parts Inventory
Stock
– Manufacturer suggested stocking
– Dealer controlled stocking
• Anticipate future sales based on history and
demand
• Requires commitment to tracking procedures in
DMS
80
The Science of Stocking Parts
Fill rates
– NADA Guide
• First time fill rate = 90%
• Same day fill rate = 95%
81
Tracking Demand
• “Lost Sale”
– Not a delayed sale, but one that is truly lost
• “Phase–In”
– Establishes the minimum number of sales (demands) before you
take the risk to start stocking a part.
82
Assume You Sell
One Coke a day
One Pepsi a week
One Mountain Dew a month
One 7-Up every 2 months
One Sprite every 3 months
One Dr. Pepper every 4 months
One Canada Dry Ginger Ale every 6 months
One A&W Root beer every 12 months
If you set your parameters to stock sodas
that sell 4 times a year:


Which sodas will be on the shelf (stock status)?
Which sodas will not be on the shelf (non-stock)?
83
Tracking Demand
“4 in 12”
– This dealers stocking criteria would be “4 in 12”
• 4 sales over 12 months = add as a stock part
84
Parts Department Risks
Obsolescence
– Generally, parts are not
returnable to the factory and,
if not sold, become obsolete
(unsellable)
85
Wholesale Parts
• Some dealers will elect to stock and deliver parts to
other retailers
–
–
–
–
Body shops
Auctions
Independent repair facilities
Other make new car dealers
86
NADA Best Practices
• Service other makes
• Extend service hours
• Introduce sold customers to service
87
New Vehicle Department
88
Pricing Strategies – Dealer Vision
Start every deal high to maximize the profit on each and
every transaction
Or
Offer an initially discounted price in the hopes
of being rewarded with more sales
89
New Car Pricing
• One Price
• Value Price
• Dual pricing
– One for the internet…higher on the lot
90
New Vehicle Department
–Holdback
–Floorplan
91
Holdback
Dealer holdback
• Depending on the manufacturer is a percentage of:
–
The MSRP
– Invoice price of a new vehicle
• It is repaid to the dealer by the manufacturer on a
monthly or quarterly basis
92
Gross as Percentage of Selling Price
93
Floor Plan Example
A line of credit specifically for stocking inventory
– Floor Plan Expense
• The interest charge on the line of credit
• Tracked on a per vehicle basis
– Floor Plan Assistance
• A manufacturer to dealer payment program to assist dealers in
offsetting their floorplan expense
– Curtailment
• A payment to lower principle balance of a specific car
94
Floor Plan Example
New Vehicle
$22,000
_________
$22,000 New Vehicle
_________
x
1%
Floor Plan Assistance Rate _________
x
5% Floor Plan Interest Rate
_________
$220
Floor Plan Assistance Total _________
$1,100 Floor Plan Expense per Year
_________
÷
12 Months in a Year
_________
Floor Plan Credits
$220
_________
$92
Floor Plan Expense per Month _________
_________
$92 Floor Plan Expense per Month
(cost of first month in inventory)
$128
_________
(remaining after cost of first month)
$92
Floor Plan Expense per month _________
(cost of second month in inventory)
Floor Plan Credit Balance
Floor Plan Credit Balance
$36
_________
$92
Floor Plan Expense per month _________
=
- $56
It is now Floor Plan Expense _________
(remaining after cost of second month)
(cost of third month in inventory)
(credits have been used up and cash must now be dispersed)
95
96
New Vehicle Inventory Control
What is the primary factor determining dealers New Vehicle
Inventory level?
97
New Vehicle Inventory Control
Days Supply
How many days the current
inventory would meet demand
if no additional inventory is
added.
98
New Vehicle Inventory Control
99
100
How can this be managed?
• Ordering Vehicles
101
Accessories
 After-sale accessories department
 Dedicated sales staff or existing staff
 Some 20 Group dealers are grossing $150 - $200 PVR
102
What is the Value of “F & I” to Dealers?
•
•
•
•
•
Substantial Gross Profit Center
Needs very little staff (1 per 70 retail sales)
Requires no advertising budget
Takes little space
Allows for “spot deliveries”
103
What is the Value of “F & I” to Customers?
• Convenience
– Can obtain loans without leaving the dealership
• Can purchase additional value products or accessories
that can be simply added to the payment
• Can take advantage of special rates offered by the
manufacturer
• A source for “credit challenged” customers who may
have difficulty on their own
104
How Do Dealerships Make a Profit in F & I?
Markup on “Rate”
– Dealer potentially earns the difference between the “buy rate” and the
“customer rate” (the APR charged to the customer on the contract)
Markup on Products
–
–
–
–
–
–
–
–
–
–
Vehicle Service Agreements
Insurance products (Life and Accident & Health)
GAP – Guaranteed Asset Protection
Prepaid Maintenance
Paint-less Dent Removal
Tire & Wheel Protection Policy
Glass Etching (Etch)
Paint Sealant
Security Systems (LoJack, Alarms, etc)
Roadside Assistance
105
F&I Risks
Compliance and regulatory mandates
– F & I manager should be a “gatekeeper”
• “Compliance Officer”
• “SAR”
– Suspicious Activity Report
» Lending Fraud
• Lenders can file against dealers
• “OFAC” (Office of Foreign Assets Control)
– Terrorist Watch List
• FACT ACT
– Fair and Accurate Credit Transactions
• Red Flag
– Identity Theft
• Discrimination charges
106
How is Success Measured?
• “PVR”
–
–
–
–
“PNVR”
“PUVR”
“Per Copy”
“Per Contract”
• “Penetration”
107
Very Good
Great
Income per
Unit
Penetration %
Income per Unit
Penetration %
Finance
$450
70%
$410
80%
Vehicle Service
Contract
$800
40%
$790
60%
Guaranteed Auto
Protection
$400
40%
$400
60%
Universal
Security Guard
$150
7%
$100
25%
Environmental
Protection Plans
$375
10%
$390
20%
Tire & Wheel
Protection Plans
$275
15%
$50
30%
Maintenance
Contracts
$340
5%
$350
25%
Per Vehicle
Retail
(PVR)
$865
$1,200
108
How is Success Measured?
What if … 100 Vehicle Sales
F&I Results
20 Financed at $1,200 per contract = $24,000
OR
60 Financed at $600 per contract = $36,000
It’s All About Penetration!
Illustrates a Critical Automotive / Retailing Concept
109
Franchise System
A franchise is a right granted to an individual or group to
market a company's goods or services within a certain
territory or location
110
Manufacturer
Zone Manager
Dealer
• “Area of Responsibility”
– Exact geographic area a
dealer is responsible for
111
112
Manufacturer
Zone Manager
Dealer
• “Market penetration”
– Percentage of market
share inside dealers
“Area of Responsibility”
113
Manufacturer
Zone Manager
Dealer
• “Planning Potential”
– Combination of market
penetration and area of
responsibility
• Determines size of
dealership and
general vehicle
allocation
114
Pump In’s - Pump Out’s
• Pump Out
– Selling a vehicle outside of your area of responsibility
• Pump In
– Another dealer selling a vehicle into your area of responsibility
115
Manufacturer
Zone Manager
Dealer
• “Planning Potential”
– Combination of market penetration
and area of responsibility
116
Manufacturer
Zone Manager
Dealer
• Franchise Agreement
• Capitalization Requirements
– (see statement)
• Facility Requirements
• Major Warranty Issues
• Floor plan rates
– Guarantee
• Successorship
117
Manufacturer
Dealer
Zone Manager
GM
Factory
Sales Rep
GSM
New Car Manager




Ordering Vehicles
Factory Incentives
Training Programs
Reporting sales
 “RDR” cards
 “Sandbagging”
118
Manufacturer
Dealer
Zone Manager
GM
Factory
Sales Rep
GSM
New Car Manager
Used Car
Manager
 Warranty Reconditioning
 Off Lease
 Condition Reports
 Factory Programs Vehicles
 Keep “In Brand”
 Certification Penetrations
 Rental Programs
119
Manufacturer
Zone Manager
Dealer
GM
Factory
Sales Rep
Factory
Service Rep
Service Manager
 Warranty Issues
 Penetrations
 “Self Authorization”
 Audits
 Problem Vehicles
 “Lemon Law” reviews
 Parts Inspections
 Training
120
Contracts In Transit
• “Contracts In Transit”
– Completed Retail Finance Contracts that have not been
“funded” by the lender to the dealer
• “CID” “Contract in Dealership”
121
Cash Flow – Profit vs. Cash
Cash flow is the lifeblood of the dealership!
And now…
the Hurrah Players…
122
Profit & Cash Flow Simulation
Let’s follow the money at Kash - Flowe Motors!
Cast of Characters:
Customer Slim Slopeigh
Sales Consultant Otto Sayles
General Sales Manager Jess Maykaupher
Wholesaler – Gesser Wholesale & Appraisal
Hugh Gesser
Retail lender – Credit Analyst Competitive Bank
Floor Plan Bank – Auditor
Dealership Controller/Office Mgr.
Customer’s Bank – Collateral Mgr. (customer’s trade)
Will DeKlein
Paula Peymenow
Max Prauphetts
Helen Wayte
123
Profit vs. Cash – Act 1
Act 1 – The Deal
(Monday, first day of the month)
• Slim Slopeigh is considering a $50,000 SUV
• Cost is $45,000 and the vehicle is on floor plan
• Purchase price is MSRP
• $3,000 rebate will be used as down payment
• Customer is trading in a Porsche and he owes $48,000
124
Profit vs. Cash – Act 2
Act 2 – The Details
•
(same day, first day of the month)
Wholesaler agrees to give the dealer $45,000
contingent on getting a title ASAP (Gesser placed it with an
exporter)
•
Credit shows late-pays but pays car loans on time
•
Lender approves loan with proof of income which
customer has with him
Customer takes delivery
•
Profit
Profit vs. Cash
Cash
Scoreboard
125
Profit vs. Cash – Act 3
Act 3 – The Office (Tuesday, second day of the month)
Controller:
– Sends the $50,000 contract to the lender to be funded
– Applies for the $3,000 rebate
– Pays off the floor plan $45,000
– Pays off the trade, $48,000
•
•
Will have to wait 3 days for the title to arrive from out of town
Wholesaler’s offer for the Porsche is contingent on getting title quickly
Profit
Profit vs. Cash
Cash
Scoreboard
126
Profit vs. Cash – Act 4
Act 4 – Trouble! (Friday, fifth day of the month)
• Lender rejects the deal due to old pay stub, requests a
current one
• Trade title follow-up renders a promise to FedEx the title
and a
“Monday for sure” promise
Profit
Profit vs. Cash
Cash
Scoreboard
127
Profit vs. Cash – Act 5
Act 5 – Real Trouble (Monday 8th day of the month)
• Trade title arrives
• Customer has still not brought in correct proof
of income
• Wholesaler shows up with a check and wants to
pick up the title to complete the purchase of the trade
• What are the dealership’s options?
– Call the lender to remove stip
– Find the customer
– “Roll the dice” Give Hugh the Porsche
Profit
Profit vs. Cash
Cash
Scoreboard
128
Profit vs. Cash – Act 6
Act 6 – Relief
(Weeks 2 thru 3)
• Customer produces the proper pay stub to validate
income
• Income is a little lower but lender accepts it
• Lender provides the funds for the Slopeigh deal, $50,000
• Have all parties been made completely whole?
Profit
Profit vs. Cash
Cash
Scoreboard
129
Profit vs. Cash –The Final Act
The Dust Settles (16th of the next month, 45 days later)
• The rebate funds arrive ($3,000)
– How much cash did it take to support this transaction?
– How long did it take before the cash flow became positive?
– How could some of this been avoided?
• What if the total profit had been $500 instead of $5,000?
– How long would it have taken for the cash flow to become
positive?
• What if we did 100 deals last month?
Profit
Profit vs. Cash
Cash
Scoreboard
130
Profit vs. Cash - Summary
Out-flow
In-flow due
Floor Plan Payment
Lien Payoff
Total Outflow
Contract in Transit
Wholesale Receivable
Rebate Receivable
Total Inflow due
$45,000
+ $48,000
$93,000
$50,000
$45,000
+ $3,000
$98,000
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Profit vs. Cash
So…Can You See That There is No Correlation Between Profit &
Cash!
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Cash Runs the Business…Not Profit!
• Cash is real while Profit is on paper only!
• You can only spend Cash, you can’t spend Profit
• It is possible to outsell your Cash (negative cash flow)
What Happens When a Dealership Runs Out of Cash?
BK!
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A Dealership Can Quickly Outsell It’s Cash
As Sales Volume Increases so will
Inventory Levels & Receivables
This Causes Reduced Cash Flow!
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Question
What is a dealership’s greatest concern on a daily basis?
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Cash Flow
What are additional causes of cash drain?
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Indicators of Struggling Dealerships
• What you can see
– Late to pay their bill
– Looking for titles
• Wholesale nice vehicles
• What you won’t see
– Delay
• Payoffs
– New
– Trades
• Payroll taxes
• Benefits
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Through the “Eyes of a Dealer”
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Thank You
Michael Hayes
mhayes@nada.org
703-448-5806
301-580-5540 cell
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