Five years ago, body shop expenses were adding up for New York state car dealer Carl Keegan -- to the tune of $125,000 a year in paint and related materials.
To cut costs, he turned to a dealer co-op, which he says slashed his yearly tab to about $90,000.
While co-ops have been around for years, some dealers are only now discovering that they can obtain products, services and expertise -- even training for their employees -- at lower prices.
In some cases, dealers may even earn a rebate for their purchase.
It is all because co-ops can leverage greater buying power than a single dealership or dealership group.
Paul Stasiak, president of the Niagara Frontier Automobile Dealers Association in Williamsville, N.Y., estimates that dealers could slash 15 to 20 percent off what they would normally pay for supplies. "There are a tremendous amount of common denominators in our business," Stasiak says. "Dealers are just looking for direction and an area to feel comfortable from an expertise standpoint."
Dealers can buy products such as business forms, office equipment, cleaning chemicals, body shop equipment, oil and paint through co-ops.
Because co-ops offer a variety of goods, they can reduce the number of suppliers dealers need, says Deborah Dorman, president of the Eastern New York Coalition of Automotive Retailers. She says dealers sometimes use about 200 vendors that supply an array of items. But by using co-ops, dealers can cut that to four or five. That's because co-ops offer dealers a one-stop shopping approach, much like a supermarket.
While it is unclear how many U.S. dealerships belong to a co-op, one co-op that has gained popularity among East Coast dealers is Leader Auto Resources LAR Inc., of Pointe-Claire, Quebec. LAR, which began in 1999, offers more than 10,000 products and services. It counts more than 1,300 U.S. and Canadian dealerships as members.
Dealers shell out what LAR calls a payment guaranty of $8,000 when they join. The money is used to cover debts if a dealer has unpaid invoices or goes bankrupt. It's also refundable if the dealer drops out of LAR.
Dealers pay for their purchases monthly; there's no monthly LAR fee. Dealers also receive periodic rebate checks proportionate to what they spend. "I think it is a business model whose time has come," says Robert Issenman, CEO of LAR.
That doesn't mean that dealers don't experience problems from time to time when using a co-op.
Dorman, of the Eastern New York Coalition of Automotive Retailers, recounts how in the startup phase, kinks were often ironed out through trial and error. For example, she says, "You can't send coffee creamer across the border because people think it's cocaine."
LAR is not the only co-op that dealers use.
The California Motor Car Dealers Association offers business forms, printing supplies and promotional items through a subsidiary called FormSource. Doug Anderson, general manager, says profits are earmarked for legislative activities that benefit dealers. "It makes sense to buy from your association," he says.
More than 600 dealers, primarily in Wisconsin, use the WISCO Cooperative Association, which started in 1972. John Hackman, president of the Marshfield, Wis., organization, says it can be a challenge to get dealers to change their purchasing methods: "Buying habits are hard to break," he says.
Keegan, who is vice president of Orange Motor Co. in Albany, N.Y., has found a remedy. He puts the rebate checks back into the budget of the department that saved money as a way to reward thrifty operations.
Says Stasiak, of the Niagara dealers' group: "The small dealers like it because they can buy as if they're a megadealer."
You may e-mail Greg Migliore at [email protected]