In October, stores using CDK Global Inc.'s dealership management systems on month-to-month arrangements found out they had little time to make a big decision: Sign multiyear contracts with CDK or quickly find a new provider.
CDK sent different letters to stores using its DASH and DRIVE DMS offerings. Automotive News obtained a copy of an Oct. 10 letter sent to DRIVE customers, which notified stores they had until Dec. 11 to sign up for two- or five-year agreements. Stores that rejected those options had to scramble to find another DMS provider in a matter of weeks.
One dealer said that isn't much time for such a massive undertaking. After all, staffers have to partake in extensive training via online tutorials and in-person sessions to learn new systems, which touch every part of a dealership, including payroll, parts, inventory and service.
Some stores have decided to move on to smaller DMS rivals such as Autosoft and Dealertrack after CDK's ultimatum.
Shannon Harper, COO of Harper Auto Square in Knoxville, Tenn., said the short window puts pressure on dealers. Harper said his company has been a CDK client for 35 years, long before it spun off from Automatic Data Processing Inc. in 2014 and became a public company. The group asked CDK whether its dealerships could have an extra month to "get ourselves squared away" before switching, but Harper said it was denied.
Two of the group's six dealerships run CDK systems, while the others use Dealertrack's platform. The two CDK stores will transition to Dealertrack, which Harper says will save around $100,000 per year for each location.
The stores have been using CDK systems on a month-to-month basis for at least a year. Harper says CDK never raised an issue with the month-to-month status. The group enjoyed the flexibility.
"This was the final straw for us," Harper told Automotive News. "Our people don't want to change, but I can't ignore $100,000 in savings for two of our dealerships just to keep a technology they're used to."
He later added: "They put us in a situation that says, 'Either sign up for a two-year agreement, or get out.' We said, 'All right, see you later.'"
The move away from CDK, Harper said, will give vendors relief as well. He said vendors were paying $300 a month per store to access DMS data because of CDK's third-party access program. Those fees then were passed along to his stores.
Not all dealerships are jumping ship after receiving the letter.
One Midwest store said it likely will stick with CDK because of the costs of switching to a new system. The store plans to sign a two-year renewal. It also expects to shift to Auto/Mate's system within the next year. CDK announced it was acquiring Auto/Mate in May, and the company believes that deal will be finalized soon.
The store was operating with month-to-month status for "a year or two," a staffer said. Its last formal contract was a one-year agreement.
"I was surprised they went this long without messing with us, to be honest," said the staffer, who declined to be named for this report.