The debate of what the Sales Department should pay for repairs and maintenance on vehicles they want to retail continues year after year.\u00a0 We encourage Dealerships to charge most of the used vehicle internal work at a Retail Labor Rate, understanding that the cost of the work will be passed on to the vehicle Customer and the Dealership ultimately will make more profit, since the Sales Department typically sells from cost on Used Vehicles.<\/p>\n
However, there are still Dealerships whose Internal Labor Rate is 50% – 60% of the Retail Labor Rate and deeply discount the parts.\u00a0 To those Dealerships, I pose the following:<\/p>\n
What if:\u00a0 You\u2019re the Used Vehicle Manager and every week you bring in a beautiful trade at a great price and you expect to make $2,000 on it, plus finance income.\u00a0 Now you\u2019re told to sell it to an employee for $500 over cost.\u00a0 (Even if the employee has plans to retail the vehicle.)\u00a0 If this happens every week, the $104,000 Gross Profit you would have made for the year is now $26,000. How happy will you be? <\/strong><\/p>\n Although the numbers may be larger in this example (and maybe not), the effect is the same when the Sales Department \u201casks\u201d the other departments to discount their efforts.<\/p>\n The Service Department, the Body Shop and the Parts Department could be selling their work at a higher rate to retail Customers than at a discounted internal rate.\u00a0 For Service and Body, there is no replenishing the time sold \u2013 once it\u2019s sold at a discounted rate, there\u2019s no chance of selling it at a higher rate.\u00a0 The time the Parts Counter People spend tracking down the parts the Parts Department doesn\u2019t stock could be spent providing excellent service to the Departments and Customers who pay a higher mark-up percentage.<\/p>\n As any Service Manager or Body Shop Manager can tell you, finding Technicians is a challenge; just like finding beautiful used vehicles at bargain prices.\u00a0 The effort to find, hire, train and coach Technicians is valuable, just like the time spent by Sales Managers finding, appraising, preparing a vehicle, then ultimately working a deal to get the best price.<\/p>\n If the Labor Rate for Service work was only worth 60% of the Retail Labor rate, you can be sure that the Factory would pay claims at that Labor Rate.\u00a0 If a parts Markup of 20% made sense, then the Factory would pay no more.\u00a0 <\/strong>I\u2019ve run the analysis many times, for numerous Dealerships, and a 25% Markup on parts will allow the Parts Department to break-even.\u00a0 There is little pride or sense in breaking even.<\/p>\n There will be times when the Service, Parts and the Body Shop will need to help the Sales Department with a discount,\u00a0we call them \u201cMulligans,\u201d but it shouldn\u2019t be an everyday occurrence. \u00a0Maintenance work should be done at the same price as Customer Pay \u2013 not more than the Customer Pay work.\u00a0 If there is a \u201cspecial\u201d or coupon price, then that is what the Sales Department should pay.\u00a0 If you retail pre-owned vehicles over 7 years old, a discounted labor rate and reduced parts markup is worthy of discussion.\u00a0 But in return the Sales Department should make the effort to introduce the Sales Customers to the Service Department, instead of worrying<\/em> that the Customer might actually return to the Dealership.<\/p>\n The Sales Department should be part of the Team and not send work outside the Dealership because \u201cthey can get it done so much cheaper.\u201d\u00a0 This is a disservice to all involved, including the Customer if something on the vehicle fails because work was done by the cheapest guy in the block.<\/p>\n The Service Department should be part of the Team and earn the right to charge the retail labor rate, by providing excellent service and not putting the used vehicles at the end of the line.\u00a0 If it takes a week to get a car through reconditioning, then I can\u2019t fault the Sales Department for demanding a discount.<\/p>\n There are a lot of challenges and debates when running a Dealership and its departments; let\u2019s not make the Internal markup be one of them.<\/strong><\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" The debate of what the Sales Department should pay for repairs and maintenance on vehicles they want to retail continues year after year.\u00a0 We encourage Dealerships to charge most of the used vehicle internal work at a Retail Labor Rate, understanding that the cost of the work will be passed on to the vehicle Customer […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,9,7,11,6],"tags":[],"class_list":["post-27","post","type-post","status-publish","format-standard","hentry","category-dealership-best-practices","category-dealership-body-shop","category-dealership-parts-department","category-dealership-sales-department","category-dealership-service-department"],"_links":{"self":[{"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/27"}],"collection":[{"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27"}],"version-history":[{"count":3,"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/27\/revisions"}],"predecessor-version":[{"id":30,"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/27\/revisions\/30"}],"wp:attachment":[{"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.profits4dealers.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}