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DATE: January 29, 2002
TO: Dealers, General Managers,
F&I Managers, Service Managers
FROM: Mark S. Krejci
RE: Car Dealer Insiders
4 Prediction for 2002 Retail Auto Industry
In the December
31, 2001 newsletter, Car Dealer Insiders made the following 4 predictions
for 2002:
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1. Profit
margins will be squeezed as factories continue to transfer more costs
to the dealer.
2. Government regulators will crack down on monitoring your F&I
practices.
3. Customer retention will be a critical challenge.
4. You will throw more money into your website to increase your volume
and close ratio. |
PREDICTION
#1
PROFIT MARGINS
WILL BE SQUEEZED AS FACTORIES CONTINUE TO TRANSFER
MORE COSTS TO THE DEALER
 Factories
continue to tighten profit margins on warranty parts/labor reimbursements
and dealer compensation.
Training
costs are being passed off to the dealer which the factory had previously
paid.
Factories
will continue to try to capture more of the dealers F&I profit.
F&I
is a priority. The best way to increase F&I margins is by product
sales and this is most effectively accomplished through the Menu.
PREDICTION
#2
GOVERNMENT REGULATORS
WILL CRACK DOWN ON MONITORING YOUR F&I PRACTICES
A
growing body of legal cases against dealers and captive finance companies
have challenged existing dealership practices. The special focus is on
limiting the amount of discretion dealers have on setting finance rates
and ensuring dealers properly handle TLA disclosures.
Lawsuits
have been filed against the finance arms of Chrysler, Ford, GM, Nissan,
and Toyota, all highlighting discrimination in lending practices based
on variable finance reserve rates on comparably credit scored individuals.
Key
lenders across the country will be moving away from finance reserve to
flats. It is just a matter of time, and I think a short time, that flats
will be the standard in financing and the dealer discretion of setting
the finance reserve rate will be gone.
Due
to the multi-million dollar settlement against AutoNations' Gunderson
Chevrolet, AutoNation implemented complete and total "full disclosure
F&I menu selling".
PREDICTION #3
CUSTOMER RETENTION
WILL BE A CRITICAL CHALLENGE
There
is one thing that the factories and competitors cannot take away from
the dealer, that is their relationships with the customers. The dealer
has built the bonds with the buyers over many years and it is important
that the dealer captures the benefit.
The
better a dealer does in managing their follow up with their customers
and potential customers, the better their long term asset appreciation
and profitability will be.
It
is important that dealers institute business models that KEEP customers
coming back for parts/service sales which consistently leads to increased
vehicle sales.
Dealers
need to remember, CUSTOMER FOLLOW UP BOOSTS REFERRALS AND SALES MARGINS.
Follow
up on current customers for such things as birthday cards, anniversary
cards; In addition, phone contacts on service performance, phone contacts
on how customers were treated when they came in shopping for a car and
making sure customer satisfaction surveys are completed.
PREDICTION #4
YOU WILL THROW
MORE MONEY INTO YOUR WEBSITE TO INCREASE YOUR VOLUME AND CLOSE RATIO.
There
are several things that are important for success in website sales:
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1. Address
your customer expectations for price.
2. It is urgent that response times on online leads are less than
15 minutes.
3. Set up a separate sales staff to manage your web-based activities. |
I hope you find
the information useful. Wishing you the best for 2002.
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