F&I, FIXED OPS ARE '01 BRIGHT SPOTS

Would you believe the average service advisor out-grosses the average vehicle salesperson by over $10,000 per month? It's true!

Year to date 2001, the average NCM client's business profile is as follows:

New vehicle volume is down a few units (41), gross per new-vehicle retail is up by $10. Used vehicle volume is equal to the same period in 2000 and the gross per used-vehicle retail is up $30. Are there any real bright spots year to date? Yes, two. One is in the F&I department and the other, fixed operations.

Part of the increase we are seeing this year in net F&I is an apparent direct result of decreased leasing volume. Another part is quite possibly that more and more dealers are now selling GAP (guaranteed auto protection) insurance.

Don't forget extended term financing. Obviously, the longer the term, the higher the potential for a strong reserve the customer's need for an extended service contract and the protection gap insurance affords. Many dealers are realizing better results due to a switch in their F&I selling philosophy, from a traditional-based system to menu selling.

The fixed operation improvement this year stems from various factors. First the average dealer has improved his or her fixed coverage by not only increasing gross in all areas, but by “holding the line” on expenses.

For example, employment expense this year is actually down .4% as a percentage of the total fixed gross. This has been accomplished with an increase in the productivity of the employees, not by increasing the employee count. This is especially exciting. Employee productivity is a “hot button” with me.

Following are a few areas where the average dealer has experienced an increase:

Technicians as a percentage of total mechanical service employees, labor gross and hours per mechanical technician, labor gross per service advisor, customer labor sales and gross per repair order (with an increase in the RO count).

In the body shop we are seeing comparable results with increases in gross per RO and per tech. In the parts department, the personnel are selling more parts (per employee) and generating more gross profit per employee.

As you are aware, to generate more gross profit in service, we only have two options.

One, we can increase our selling price. Two, we can reduce our cost of labor. No, I'm not totally crazy. Without exception, at some point during each 20 Group meeting, the discussion turns to the lack of qualified technicians. I'm not suggesting that you reduce technician wages, but rather reduce your effective cost of labor by having a mix of skilled technicians along with apprentices.

Your only option, other than reducing cost, is to increase your selling price. Many clients are now using variable labor rates and this seems to be effective.

Another recent focus has been service advisor sales training. If you don't think this is important, take a minute and calculate the gross profit generated monthly by the average service advisor, and then calculate the gross profit generated monthly by the average vehicle sales person. Would you believe the average service advisor out-grosses the average vehicle salesperson by over $10,000 per month? It's true!

These are the improvements our clients are seeing this year. Many customers don't return to our service departments once their warranties expire. What difference would it make to our bottom lines if we could incorporate the aforementioned progress with an increased traffic count in the parts and service departments and body shops?

It's exciting to see and share in this progress.

Good luck and good selling!

Tony Noland is director of international operations for NCM Associates. He has 30 years of automotive retail experience.

For information to obtain a complete analysis of your financial operation in comparison with Best Practices benchmarks, fax a written request to (913) 649-7429.