Dealers are getting creative to stay profitable despite robust sales for new cars and trucks in recent years. The reason: New-car margins just don't pay the bills anymore because of fierce competition among dozens of brands, and consumers who demand more features and new technology without the added price.
Automakers have stepped up their certified pre-owned programs, and many retailers now rely more on used cars than new ones to pay the bills. Service departments are looking at tire sales and body shops to boost revenue. Some retailers say they pre-load vehicles with F&I products or accessories to add some margin to each sale.
But sometimes even that's not enough, according to dealership consultants who are urging retailers to look at every aspect of their business for more cash. Beyond the tried-and-true method of adding more products to each sale, dealerships need to get involved in store operations such as marketing, warranties and insurance rather than only relying on outside vendors.
"They are a retailer when it comes to new and used cars, but think about everything else that goes on in there: new, used, F&I, parts and service," said Thomas England, a partner in the DHG dealerships practice.
"When you look at the total sales and all the cash that goes through dealerships, a good portion of that cash is getting paid out. Well, how do I get my hands on more of that cash? That's what a dealer should be thinking. From expense control to different business transactions, there's just so many opportunities to be part of that transaction," England said.