Need a list of cost cutting ideas for a dealership.

Hello All,

I need feedback on how best to cut cost at our dealership. A top ten list or link to a web source will greatly be appreciated!

Best Regards

Joe Tareen

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Permalink Reply by Steve Gerhartz on October 13, 2012 at 11:15am
Regularly review all purchases for supplies from all vendors and shop them online. We found we were paying Reynolds $500 for a toner cartridge we could purchase for less than 1/2. It all adds up.
Permalink Reply by Scott Suber on October 13, 2012 at 11:24am

pay very close attention to your clean up shop supplies as well as thier usage...... tire brightner is very expensive, if you use it do it sparingly.... and i would look at your fuel expense for cars on the lot as well as all used vehicle sales if you put fuel in them for sold customers ,,,,, reduce the amount given by half.. we have gone to 15 dollars for a used purchase...... that adds up very quickly!!

Permalink Reply by Joe Tareen on October 13, 2012 at 1:42pm

Thanks.

Permalink Reply by Don McEwen on October 13, 2012 at 11:19am

If you are an NCM 20 Group Member you can find a compilation of best ideas on your Member site, worth looking into.

Permalink Reply by Jim Boldebook on October 13, 2012 at 11:28am

Joe, if you want to cut costs, get your team involved.  sit down with everyone...and I mean everyone. lot boys included.  Ask for ideas.  form 'cost cutting teams' for specific areas.  You'll be amazed at the ideas that emerge and best of all, you'll get buy-in from the team.  Make it fun.  Give out some rewards for best ideas and execution.

Permalink Reply by Joe Tareen on October 13, 2012 at 1:41pm

I agree with you wholeheartedly

Permalink Reply by Bobby Compton on October 14, 2012 at 2:56pm

Excellent suggestion, Jim Boldebook!

Amazing what happens when you get the entire team involved, I love that you recommend lot boys included.

Lot porter first mentality,- motivating and winning others over from the bottom up!~ 

Permalink Reply by Tony Provost on October 13, 2012 at 11:28am

We structure our stores around 12,000 dollars of production per employee. We also, have to bring a minimum of 1350 per delivery to the bottom line. Very challenging in our current market.

Permalink Reply by Doug Davis on October 13, 2012 at 1:13pm

Being on this site, I assume that you are looking at reducing costs from an Internet Director's position. I am going to further assume that you have a good internet department that produces at least 50 percent of your business with dedicated, cradle to grave, ISMs.

A dealership's three major variable expenses are Floor Plan Interest, Advertising and Salesperson Compensation and Incentives. 

Let's examine each of these expenses as it relates to the Internet Department.  

Advertising.  Most of us agree that the Internet is the most cost effective and efficient form of advertising.  In most dealerships it amounts to less than 24% of the total advertising budget. Look at all areas of the advertising budget on a ROI basis.  Market your cars effectively on the internet.

Interest Floor Plan.   Are you looking at each model based on turn rates?  Are you allowing the factory to load you up with vehicles that nobody wants?  You will spend a disproportionate amount, on advertising, to get rid of these.  Your advertising will be less effective because nobody wants these cars.  They will sit in your inventory, running up your floor plan expense.  Are you using market-based pricing, to increase your turn rate, on both new and used vehicles?   What is your days-to-market, on used vehicles?  Is your Used Car Manager putting vehicles online, at outrageous prices, for the first 15 days, effectively gluing them to the pavement?  How fast are you turning you used car inventory?  Done right, you should be turning your inventory under 30 days with negligible wholesale losses.

Salesperson Compensation.  There has never been a time, when having weak salespeople is more detrimental.  Dealerships can not afford to carry low percentage salespeople.  Today, we have buyers and fewer shoppers.  Closing ratios should be much higher than they were twenty years ago.  Train or cut the weak ones.

Considering ISMs, and if you are using market-based pricing, you must depend on devaluing trades, switching to leasing and optimizing your F&I, to maintain your gross.  Are their pay plans designed to motivate them to do this?   

As always, it is important to cut the fat without harming the muscle.  

Permalink Reply by Joe Tareen on October 13, 2012 at 1:41pm

Great comment. Thanks!

Permalink Reply by Big Tom LaPointe on October 15, 2012 at 12:57am

This is kind of an expansion on maximizing ROI on internet marketing from Doug Davis above, but I know of dealers cutting $5-10k per month by performing a detailed MONTHLY audit of the TRUCAR bill  - digging into CRM can reveal if they were actually the first instance of a particular lead.

Further, perform a VERY CRITICAL ROI evaluation of all your web lead sources to ensure their effectiveness.

Permalink Reply by Doug Davis on October 15, 2012 at 1:37am

Tom,  I named the three largest variable expenses because that is where the real money is.  

I would suggest that any dealer that is spending that kind of money on a parasitic organization like TrueCar needs to learn how to market their own vehicles. Any dealership that does this is WEAK!!!!

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