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Turning Data into Profits: Strategies to Maintain Dealership Profitability Amid Sales Challenges in 2023

  The retail auto industry has undergone significant changes over the past few years, including shifts in consumer behavior, supply chain disruptions, and technological advancements impacting how dealerships operate. The current challenges of declining sales and affordability issues, along with the increasing number of older vehicles on the road, create an opportunity for dealerships to focus on areas like F&I, which can help maintain your dealership profitability. Analyzing the most significant trends shaping the retail auto industry could help manage their impact on dealership profitability. Therefore, it is critical to monitor the significant shifts in the industry, such as: 1. New light-vehicle sales in 2022 topped 13.7 million units, the lowest number of sales since 2011. The National Auto Dealers Association reports that the industry sold 13.7 million new cars and trucks last year, the lowest number of total sales since 2011. In addition, the semiconductor microchip shortage and other supply chain disruptions dealt a significant blow to the retail auto industry, causing sales to drop by 8.2% compared with 2021. However, this disruption also allows dealerships to strengthen their F&I departments. Dealerships need to maximize profits on each sale. F&I departments could be a profit center to provide an additional revenue stream on each sale, helping offset any revenue loss from lower sales volumes and maintain dealership profitability. 2. Parts-and-service revenue is on the rise. Six publicly traded new-vehicle groups reported same-store parts-and-service revenue of $12.7 billion last year, an increase of 10.5% year-over-year. The companies reported $3.4 billion in same-store parts-and-service revenue for the fourth quarter, up 9.1%. This reflects an opportunity for dealerships to offer F&I products like maintenance plans and service contracts. These products can help customers save money on future service needs while generating additional revenue for the dealership. Furthermore, the trend also highlights the rise in vehicle mileage. 3. Average age of cars increases to 12.2 years. The average age of light vehicles in operation (VIO) in the US rose to 12.2 years, according to S&P Global (formerly IHS Markit). The 2022 average age marks another all-time high. According to the analysis, the global microchip shortage and associated supply chain and inventory challenges could have influenced consumers to continue operating their existing vehicles longer. As the average age of vehicles on the road continues to rise, dealerships have an opportunity to capitalize on the increased demand for repairs and maintenance services. This presents a win-win situation for both customers, who could save on their repair costs, and dealerships, who could generate additional revenue from the services offered, including through their F&I department. 4. Aftermarket “sweet spot” is growing- 6.5% year-over-year increase. According to Experian, 35.8% of vehicles in operation (VIO) now fall within the aftermarket sweet spot, a 6.5% year-over-year increase. As more vehicles fall into the 6- to 12-year-old category, they become ineligible for general manufacturer warranties, increasing the importance of maintenance and potential component replacement for owners. Aftermarket professionals must keep track of the model year and types of vehicles in operation to anticipate potential consumer needs and driving habits. In addition, F&I departments can benefit from professional training to assess consumer needs and offer valuable ancillary products to capitalize on the opportunity presented by the increase in vehicle age. 5. More car owners struggle to keep up with their car payments than they were in 2009. As per Bloomberg, automobile repossessions are climbing, and Americans fall behind on their car payments at a higher rate than in 2009. If used vehicle prices continue to decline and the negative equity gap widens, the situation may worsen. People who cannot trade for a lower payment may end up surrendering their vehicles to the bank. Dealers can improve their profitability by helping customers mitigate negative equity by offering payment solution tools. The tool would help customers make an extra payment each year by making bi-weekly payments, which saves them money in financing charges and helps build equity faster. `Reach out to your PRO Team to implement this tool in your dealership.

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auto dealership consultants

Looking Beyond Your Own Headlights: How Profit-Driving Partners Can Help Boost Your Profitability in Today’s Market

In today’s rapidly changing automotive market, it’s crucial for dealerships to keep a close watch on industry trends and find new ways to increase profitability. As such, the expertise of  strategic auto dealership consultants can be invaluable in navigating these challenges. A recent research report highlights the decline in vehicle registrations, with a 14% decrease in YTD Q3 2022 compared to the previous year. On the other hand, this trend emphasizes the importance of proven strategies to make up for lost profits. Source: Experian as of January through September of each year The big question arises, how can dealers make up for the lost profit even when the sales are getting impacted? Working with strategic consultant partners can be a game-changer for dealerships looking to significantly boost their bottom-line profitability in this current market condition. In addition to the profit-driving solutions, there are numerous benefits and value of having an external partner to support the dealership’s profitability and teams. Expanding your horizon: The power of outside perspective and strategic auto dealership consultants  Dealership teams often get bogged down in day-to-day operations and lose sight of the bigger picture. Strategic consultant partnership with external providers provides an outside perspective, allowing dealerships to see beyond their own headlights. Helping dealership teams keep sight of the bigger picture is a huge benefit of having the right external strategic consultant partnerships. As a success partner, the PRO Team brings years of hands-on industry experience providing clients with context and perspective to safely navigate current market landmines. Furthermore, Having current market intel and vision of market trends allows us to leverage our data insights with our deep industry knowledge to help dealerships streamline operations and enhance customer experience with cutting-edge solutions and tools. Consultants assist in discovering efficient solutions to questions such as: What are the new and fresh ideas and solutions we need to create to get us past this problem and back on track with our desired outcomes? What are the unexpected opportunities that are being presented that might move us in the direction we want but don’t look the way we thought they would look? (Where is the gaggle of quacking ducks? Or where is your next $100 per car coming from?) What exactly is the gap between where customers are frustrated and what the competition is doing? Leveraging expertise and experience of strategic auto dealership consultants partners for optimal results Taiichi Ohno, the father of the Toyota Production System, once said, “Without standards, there can be no improvement.” That’s because it is not possible to improve on a process that is not documented, inconsistently applied, and not universally understood. For the process to be consistent with your dealership goals and be universally understood by all your teams, it is critical to eliminate tribal knowledge. When only an individual or a small group keeps the information, it becomes difficult to effectively communicate best practices. Making companies reliant on a handful of experienced workers. To develop a result-driven culture and better collaboration among teams, consultants bring in expertise and years of experience. To ensure all your employees understand your dealership goals and contribute towards achieving them. Therefore, PRO Team focuses on regular on-site development of employees in addition to strategic solutions unique to your dealership. PRO Team helps dealerships create productive, well-synced teams and a positive culture. We use and recommend an enterprise development solution that provides precise behavioral metrics and descriptions. This is how we guide the hiring team to make data-driven decisions that drive revenue. Furthermore, F&I consultants bring in the knowledge and experience to identify gaps in attaining revenue goals. They help you get effective answers to questions such as: What are the culture deficiencies in my dealership that are preventing us from being high-performance vs. high maintenance? What are the missing structural components required to produce consistent execution on our critical drivers? What do I need to stop doing to make room for higher-value activities? Overall, F&I consultants bring specialized skills and years of experience in sales, F&I, employee development and retention, and dealership management. They use this expertise to help dealerships implement growth strategies unique to their market and customers. The road to success with strategic consultants Our valued clients have seen a PVR growth of $2400 in 2020 to $3400 in 2022. We continuously align ourselves with the latest industry trends and closely monitor shifts in the market. In addition, our historical perspective allows us to develop strategies to manage cost of sales and guide you in effectively balancing expenses and profitability. Smoothly transition to partner with your experienced PRO Team to maximize your dealership’s potential and achieve revenue growth goals. Contact us today to set up a free discovery call.

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Strategies to build a successful future of a car dealerships

Are You Doing Enough to Futureproof Your Dealership?

Don’t use the success of the past to address the challenges of the future of car dealerships. Innovative tools and strategies for a changing market. Recently, the automotive industry has undergone considerable changes and the economic shifts in 2022 have set the stage for automotive dealerships to focus on new opportunities and challenges in the coming year. Changes triggered by the pandemic, such as limited inventory, increasing interest rates, and inflation, have impacted both dealerships and consumers. It is evident that dealerships are not immune to economic fluctuations and that there is no single-solution approach to address the whims of the market. The importance of preparing for what’s next cannot be stressed enough. Failing to plan is planning to fail. Therefore, now more than ever, strong partnerships, strategic planning, and modern technology can help lay the foundation for sustainable profitability and success for automotive dealerships as we head into 2023. When confronted with market volatility involving electric vehicles, attacks on traditional dealership franchise models, and new regulations, it’s crucial to reassess your strategies, tech integrations, and partners. Regardless of market conditions, there are strategies and practical approaches that can help you boost your profitability and futureproof your dealership. 1. Optimize your marketing spend Competition remains a constant challenge in the automotive industry. In the competitive market, an AI-based marketing tool would allow you to lower your marketing spending and target your marketing efforts more effectively, resulting in higher conversion rates and increased sales. The internet has become a key source of information for car buyers, who spend weeks or months researching the right vehicle. Most people use online resources to research vehicles, compare prices, and read reviews before heading to a dealership. By providing dealerships with valuable insights such as shoppers’ motivation to buy, days in the market, and buyers’ details, an AI marketing tool could help dealerships streamline their marketing efforts, improve their bottom line, and better compete in the marketplace. Find out more about the tool here. 2. Creating vehicle affordability is a win-win Dealerships must differentiate themselves from the competition. Vehicle affordability can be a challenge for many car shoppers, particularly in today’s economy. Shoppers could easily slip out of the sales process if they cannot find an affordable vehicle in your dealership. Hence, a bi-weekly payment tool helps you re-engage shoppers by assisting them in paying down loan principal much faster, equating to the quicker building of equity for them. It is a tried-and-tested method that has been used on home mortgages for years. Finally, it is available and just in time for consumers seeking auto loans. The payment tool could help you create a unique differentiator, enhance customer experience, and improve cash flow. Learn more about how it can be a win-win for you and your customers. 3.Unlocking additional profit centers with F&I solutions F&I solutions, protection products, and participation programs have long been vital contributors to the economic success of dealerships, even prior to the pandemic. Now, more than ever, the role of the F&I department in terms of profitability and customer protection is undeniable. The average age of light vehicles in the U.S. reached an all-time high in 2022 as consumers continue to hold onto vehicles. In addition, the sale of used cars with high miles means more consumers would need vehicle protection plans to keep older-model and even gently used vehicles in top shape after purchase. Additionally, with continued pressure on the finance reserve, refining your F&I product offerings is the key to maintaining profits. Although this may seem obvious, many dealerships fail to achieve this goal. Without presenting customers with all their options, you can’t expect them to make informed decisions and make purchases. Vehicle service contracts (VSC) and other F&I products can protect customers against inflation and the high cost of repairs and replacements. As prices rise and the cost of parts and labor increases, customers can save money by locking in the current rate with an F&I product. To emphasize, these products can provide peace of mind and financial security for customers needing to use them a few years later when parts fail or malfunction PRO Tip: If a customer can’t afford an F&I product, they can’t afford to take the risk of paying for expensive repairs or replacements out of pocket. Enrolling in an F&I product is a wise financial decision that can provide long-term protection and savings. 4. Avoiding the risks and prioritizing ethical practices for a secure future of car dealerships Regulators are aggressively monitoring the market and have indicated that they are on the lookout for any questionable approaches. Unethical and questionable practices in your dealership could put your business at risk. A fine from a regulator such as Federal Trade Commission (FTC) or The Consumer Financial Protection Bureau (CFPB) can erase any profit you might have made on a questionable deal and put you in debt. Furthermore, it can also harm your reputation as a customer-friendly and responsible business impacting the future of your car dealerships. In these uncertain times, it’s essential for automotive dealerships to take steps to protect their businesses, reputations, and employees. Knowing that regulators are looking for questionable practices can help you avoid costly mistakes. It’s never worth risking noncompliance for the sake of a single sale. 5. Offerings for high-tech vehicles’ electronic components As manufacturers shift to meet the demand for EVs and offer incentives like free maintenance and extended powertrain warranties, customers need affordable ways to cover the many components excluded from factory warranties. Quantum electronic component coverage provides a cost-effective solution for protecting the expensive technologies and electronics in modern vehicles. Therefore, by providing customers with this coverage, dealers can increase service retention, drive higher revenue, and save their customers from paying expensive repair and replacement bills. 6. Strong partnerships with industry pros for successful future of car dealerships Having strategic partners and industry professionals on your side can make all the difference in the constantly changing automotive industry. A strong partner understands that dealership success

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F&I products in inflation- F&I to the rescue

F&I to the rescue: How F&I Products Provide Relief to Customers Amidst Inflation, and Opportunities for Dealerships

Inflation remains high despite prices cooling in July and August. In addition, rising interest rates indirectly increase the cost of borrowing, making it more expensive to buy a vehicle. As per Kelly Blue Book data, the average price of new vehicle prices increased by 12% from July last year, and used vehicle prices have gone up by 40%, as per data released by the U.S. Bureau of Labor Statistics. Inflation and high prices have caused issues of vehicle affordability for consumers and impacted dealers’ profitability. However, there is light at the end of the tunnel for both consumers and dealers. F&I products provide relief to consumer and dealers in inflation. F&I products such as vehicle service contracts (VSC) could help shield customers in inflation and provide financial security from costly repair and replacement expenses in the future. Customers most likely would be using their service contract after a couple of years when a part breaks down or in the event of a malfunction. With prices rising rapidly and the cost of parts and labor going up, customers are locking in the current rate and saving in the future. A VSC creates peace of mind that the expense of owning a vehicle is more fixed than variable. Increased age of cars in the U.S. Chart source: S&P Global Mobility The average age of light vehicles in the U.S. reached an all-time high in 2022 as consumers continue to hold onto vehicles. A study by IHS Markit shows that the average age of light vehicles is now 12.2 years. The global chip shortage influencing the supply chain and inventory and rising prices are the primary factors pushing the U.S. vehicle age higher. F&I products provide relief to consumers in inflation With the rise in vehicle ownership, consumers look for options to safeguard themselves against expensive and inconvenient repairs and replacements. Therefore, F&I products purchased now could provide relief for customers later. Let’s look at the examples below to see how F&I products help protect customers. Guaranteed Asset Protection (GAP) GAP helps pay the difference between the vehicle’s market value at the time of the incident and the outstanding loan balance. With limited inventory, rising car prices, and higher interest rates on loans, GAP protects customers against financial burdens. Exterior and interior appearance coverage Every day, drivers encounter things that are out of their control — the elements, the weather, and the playful toddler. But these encounters don’t have to devalue the car. Now more than ever, when the prices of new and used vehicles are skyrocketing, it makes sense to maintain the condition and appearance of the cars. Therefore, offering industry-leading appearance coverage, such as Cilajet, would add value to the customers’ purchases. In addition to the coverage, PRO offers comprehensive training to support sales goals and the growth of your F&I department. Tire and wheel coverage As per AAA data, drivers Paid $26.5 Billion in Pothole-Related Repairs in 2021. “In many parts of the country, winter roads will likely give way to pothole-laden obstacle courses,” said Mary Maguire, Director of Public/Government Affairs for AAA Northeast. “When a vehicle hits a pothole with any kind of force, the tires, wheels, and suspension get the brunt of the impact, and fixing any of those items is pricey.” Thus, considering tire and wheel coverages for vehicles would ensure additional security and savings for customers. Anti-theft product backed by warranty With vehicle theft up by almost 12% since 2019 and high prices of new and used vehicles, anti-theft products can offer relief to today’s buyers in the event of a theft. The immediate benefit for your customers is, in general, a lower insurance premium for theft. In other words, the insurance settlement may be far less than the cost of replacing a vehicle. Serving the needs of customers With more used vehicles sold amidst inflation and inventory issues, dealers and F&I managers should ensure their product portfolio aligns well with the needs of today’s consumers. In uncertain times, consumers tend to look for low-risk purchases and time-stamped guarantees. Certified pre-owned programs, appearance protection, and vehicle service contracts provide buyers with an extended piece of mind that can be tied to your dealership. Highlighting the limitations of CPO coverage may be in their best interest and yours. We can be your resource Over the years, PRO has helped dealerships turbocharge their profitability. With a dedicated team and strategies to support your success, you could successfully navigate the uncertainties of the market while growing your bottom line. Reach out to us today.  

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One Barrier That Dealers Need to Overcome to Hire and Retain the Right Talent

Hiring the right person is critical to optimizing success in every department of your dealership. We put a lot of time and resources into the process for a good reason. Recruiting the wrong fit for an important role can be a huge inconvenience. Not to mention, a potentially significant waste of time, money, and increase in employee turnover. Learning to search for qualified professionals and assessing their traits can enable you to hire, retain, and train the right talent for your dealership. Identifying the right person for the right role requires two essential factors. 1. Awareness of your dealership culture: Self-awareness of your dealership’s shared values, goals, and practices is crucial to make sure that any potential hires fit your company—but to determine that, it is important to know your own culture. What kind of workplace do you hope to build, and what traits do you value most in your employees? 2. Awareness of the candidates’ traits: The second step is to measure the dynamics of the individual—their behavioral characteristics, decision-making styles, and energy to assess how they fit with your culture and what could help them thrive in achieving the shared goals. The barrier to hire and retain the right talent One of the barriers to hiring the right person is neglecting to consider evaluation strategies beyond the face-to-face interview. The interview may not always be the best way to evaluate someone’s true personality. This doesn’t mean you should abandon interviews altogether. But it means adding more tools to your interview arsenal beyond evaluating resumes and a few rounds of interviews. Furthermore, additional assessment tools in conjunction with interviews give you a more well-rounded sense of potential candidates. Pair the process with personality assessments to determine an individual’s strengths and limitations. Everyone has a unique make-up and natural way of operating in life—from home to work to socializing. Additionally, your unique wiring is what creates the one-of-a-kind you and gives you your individuality. Moreover, identifying and comparing those traits with the company culture and needs would allow you to hire and retain the right talent. A practical resource to learn about the candidates’ traits Data-driven hiring: There are valuable resources that one may utilize to determine on-the-job traits and how they play a role in team dynamics and the overall culture of the dealership. PDP is one such tool that provides precise behavioral metrics and descriptions to help the hiring team make data-driven decisions. Some of the key benefits of leveraging the tool are: Prioritizing and weighing critical strengths for the position Analyzing individual’s perceptions of the job requirements Preparing effective advertising to attract the best applicants Matching applicants to open jobs Conducting structured behavioral interviewing Strengthening hiring managers’ knowledge and skills for making the right hiring decision Ultimately, selecting the best talent for the right role Creating strong teams with the data-driven tool Understanding team culture is critical to building stronger teams and dealership profitability. Too often, a group of people put together in an office environment is considered “a team” without a lot of thought about the group’s make-up, purpose, or intended outcomes. Therefore, an assessment tool such as PDP helps assess team effectiveness and removes the guesswork. Furthermore, utilizing the tool could support teams in developing skills to turn conflict into productive directions. Discover their ‘why’: Another applicable hiring practice is to find out what inspires your potential hire the most. Does your candidate have a deep sense of purpose? Hence, it will serve as your point of reference for all their actions and decisions and enable you to determine what makes them committed and passionate about their goals. It is essential to learn about their ‘why’ because it lets you see: The source and strength of their inspiration—what they do, how they do it, and why they do it. Whether they have a sense of contribution to something larger than themselves How they might behave when a situation demands characteristics such as work ethics and determination. Over the years, PRO has helped dealerships build efficient teams and hire the right person for the right role. In addition, our team is certified in effectively utilizing PDP for better hiring, which ultimately leads to higher profitability and reduces employee turnover. Contact us today to see how we can help you leverage this tool and positively impact your dealership teams.

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5 Key Qualities to Transform Great Managers to Great Leaders

Great dealerships need great leaders Leadership is a word we often hear—simply put, it is an individual’s ability to influence, motivate, and enable others to contribute toward success. Though it is a role some tussle to uphold, it can be mastered. If you’re a current or aspiring manager, it’s crucial to focus on good leadership as it can be a huge asset to advancing your career. In addition, dealerships need great leaders as leaders help direct a dealership’s resources for improved productivity and achievement of goals allowing for mutual success. Effective leadership comes with life-long learning about oneself and the responsibilities of being a leader. Individuals have their own inner lives, and they are driven by their beliefs, aspirations, values, and fears. These interior elements vary from one person to the next, guiding individuals to take different actions. Interestingly, the choices people make for themselves and their teams are extensions of reality in their hearts and minds. Therefore, those who seek to lead impactfully and take dealerships to the next level must look at their internal experiences and decipher their traits. We often observe a basic level of self-awareness managers have about themselves, such as, I am a team player, I can’t trust anyone, or I believe in transparent communication. Often top-performing sales personnel become great managers, but what separates managers from a leader? The difference between managers and leaders Managers and leaders complement each other but are commonly two separate people. A leader inspires and encourages others to achieve visionary goals. Whereas a manager deals with their department’s day-to-day operation and ensures the tasks are being performed as expected. They focus on their performance but carry minimum responsibility for their peers. Generally, managerial tasks in dealerships include: Review inventory to ensure the proper mix of stock Stay abreast of and comply with federal, state, and local regulations Direct and schedule the activities of department personnel Make sure the service quality meets customers’ expectations Plan training and development for team members What does it take to become a great leader, and why do dealerships need great leaders? Leadership skills are critical to maximizing the efficiency of the whole team, which facilitates achieving the overall vision and goals of the dealership. Though different leadership styles can be utilized at different times, some qualities are essential to transform great managers into great leaders. Constantly learning and striving for growth Great leaders refuse to remain stagnant and continually seek opportunities to develop themselves and their teams. They strive to improve their self-knowledge to identify strengths, limitations, and areas of improvement. Furthermore, leaders have a vast appetite for learning beyond their role in the industry and appreciate the company of experienced professionals to accelerate growth. Their team members’ personal and professional development is equally valuable to great leaders. Good at identifying people who are better than them at specific jobs Great leaders do not shy away from acknowledging their limitations. Instead, they fill the gap by finding people who are better than them at specific jobs. Knowledge of one’s own traits and teammate personalities provides understanding for employing the right person for the right role. Measuring characteristics and dynamics is relatively straightforward with data-based behavioral analysis tools such as PDP. PRO Team’s well-trained and certified consultants can support hiring and placing individuals in the role where they can contribute to the highest of their capabilities. Focus on their team as much as they focus on their customers The automotive industry is people-centric, and employee satisfaction matters as much as customers’ satisfaction. Furthermore, dealership culture influences customers’ service, directly impacting referrals and sales. Therefore, employee development, proper training, and positive work culture are imperative to retaining talents in your dealership. Great leaders recognize the value of their people and their professional needs. They are mindful of identifying ways to help, enrich, lift, and empower their teammates. Anticipate market trends and adapt to changes quickly Shifting ahead requires leaders who can take bold and strategic actions. Having the vision to anticipate what lies ahead and taking proactive steps to market conditions can keep you and your people ahead of the power-curve and able to react more quickly when things to change. Great leaders stay abreast of the trends and recognize that uncertainty is a part of the auto industry. From digital financing to touchless deliveries and everything in between, effective leaders adapted quickly to save the day. Consider both the bigger picture and the details Tracking the big picture involves stepping back from time to time to scan the horizons beyond the auto industry, for instance, assessing the effect of high-interest rates on vehicle affordability and sales revenue. Conversely, focus on details such as how much you have to make up on profit per retail unit to stay even with last year. Do I have a high penetration product to increase profit per vehicle retailed, or is there a hi-tech marketing tool to increase the market share of my dealership? Constantly evaluating the market and utilizing industry resources for awareness of the trends and indicators would enable managers to broaden their perspectives and transform into leaders. Dealerships need great leaders for mutual success Great leaders adapt to their surrounding environments and empower the team to succeed. Furthermore, an effective leader understands the strength and limitations of their team, is decisive—adapts quickly to changing situations, and treats the team with fairmindedness and equity. Dealerships need great leaders to foster a culture of growth that leads to mutual success for dealers and their team. We are here to support your success The auto industry is experiencing fresh challenges and could see significant changes as the market shifts. PRO has been supporting dealers with innovative strategies to keep profits high. Reach out to us to see how we can boost the profitability of your dealership.  

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