Dealerships that adopt price caps for dealer reserve shouldn't pick an arbitrary number; they should choose something logical that they can defend later if a regulator questions it, says Jim Radogna, director of compliance at the College of Automotive Management in Santa Ana, Calif.
"It should be based on something substantial like an average rate of sold deals over the last 90 days. It can't be something someone just pulls out of the air," he told attendees of last week's Automotive News Access F&I Webinar "F&I Trends to Watch in 2014."
Radogna noted that while a few states have capped prices, there's been no real regulation push so far. Still, to stave off problems, he said, dealerships should consider price caps or maximum markups in 2014. The added benefit? Fair and consistent pricing will probably lead to higher product penetration and profits, he said.