Which dealership parts operation would you rather have?
One dealer sells $310,000 in parts for a two-month period; the second dealer sells $1 million in parts in the same time period. The first dealer makes a departmental net profit of $36,000 compared to the second of $33,000.
Dealer number two is obviously involved in parts wholesale, operating below his breakeven percentage. If you wholesale a part below your breakeven, you are forcing the retail portion of your parts department to subsidize those parts of your operation that are under water.
We have not even begun to discuss the hidden costs of wholesaling, i.e. larger inventories, obsolescence problems, receivable issues, increased manpower requirements, increased liability risks, etc.
What can you do? Well obviously, we can either increase the gross profit margins or reduce your expense or a combination of both.
We don't advocate getting out of wholesale, but why not run it at a profit? If you lose a little business, you will probably find out that you are ahead of the game.
In most cases, dealerships that raise their margins, do not lose customers. The majority of your customer base is with you as much because of service as price.
