Knowledge is power, and you can’t know what you don’t know. These are two undisputed truths, and they are all you need to understand the importance of Vehicle Condition Reports.
Think about your own business. Whether you repair vehicles, sell them, lease them, or all of the above, do you have easy and reliable access to the condition of every vehicle your business has touched? How complete are those reports? How legible are they? How consistent is the quality and completeness of your vehicle condition reports from one to the next? If you didn’t answer “100%” to each of those questions, then you should consider vehicle condition report software included with our mobile software solutions InspectionNotes and ReconMonitor.
Your business operations and customer satisfaction will benefit from quality vehicle condition reports. Contact us for more information and a free demonstration of our powerful vehicle condition report app.
How prepared was your dealership for 2017’s roller-coaster ride of new and used car sales?
If you are like many dealerships, you weren’t prepared for the unusual hurricane-induced car buying demand spike in the Fall that usually happens after tax refund time in the Spring.
It’s a dealership’s worst nightmare to be caught during a spike in sales demand at a time of low inventory, and then be forced to sit back and watch as potential customers head over to your competition.
Then, as you scramble to purchase inventory and get it frontline ready, you can almost watch the revenue slip past your balance sheet. Will you get the cars cycled out before the demand is gone?
Oh, to have a reliable crystal ball during auction time!
Actually, if you know where to look, there already is one. Auto Industry forecasters are expecting lower price volatility than 2017’s record highs and unusual fall spike. These same prognosticators also predict higher volumes of used vehicle sales in 2018.
The crystal balls reveal that a more desirable mix of late-model vehicles entering the marketplace and higher take-home pay as the new federal tax law is implemented, will heat up the used car market, so you might want to prepare yourselves now and reap the rewards when the buyers start coming.
From almost the minute the new tax law was passed, large corporations began announcing bonuses and pay raises for American households. Cox Automotive Chief Economist, Jonathan Smoke, revised his forecast of 2018 total used-vehicle sales to nearly $40 million.
At a recent conference call with investment analysts and reporters, Cox stated that they estimate 85% of US households will see an income increase as a result of the new tax laws. Cox also anticipates a 2 to 4 percent decline in 2018 U.S. new light-vehicle sales to fewer than 17 million units.
By now, all the Harvey and Irma hurricane victims have replaced their cars, so that spike in new and used car sales as replacement vehicles ended in December of 2017.
Still, experts believe that the U.S. economy will continue its strong demand for new and used vehicles in 2018 due to a low unemployment rate, strong financial markets and consumer confidence, and incentive offers from automakers.
Where will the used inventory come from?
It has been predicted that 2018 will be a slowdown in the increasing numbers of late-model vehicles entering the used market, with 2018 lease returns growing only 8.1 percent to 292,000 units.
And most of the growth is in pickups and SUVs, which are more in demand, so grounding dealers will retain more off-lease vehicles themselves.
Expect to see lower rental car-fleet vehicle returns, fewer coupes and hatchbacks, will fall this year, But there will be an increase in pickups, SUV’s and crossovers.
How to stay ahead of the demand.
Following the economic downturn started in 2008, car buyers’ desires for new vehicles leaned heavier towards cars than trucks. This caused a mismatch in the used market as consumers started leaning back towards trucks and SUV’s during the upswing. But in 2018, half of off-lease vehicles are expected to be light trucks.
Heed the warnings.
Retailers who sell late-model SUVs and crossovers will benefit from declining used-vehicle prices this year, that could squeeze dealerships’ volumes and margins on new light trucks
Cut your frontline cycle times.
Now is the time to focus on the operations and look for ways to eliminate bottlenecks and unnecessary snarls.
Efficiencies save profits
The focus on fast and efficient reconditioning becomes even more important to maintaining margins on new car inventories as used car demand puts pressure on new car pricing. A small investment in a recon software such as ReconMonitor can mean the difference between profit and loss during a squeeze like the one being predicted now.
As a used car dealer, the decision to pursue CPO designation for select vehicles can be advantageous, making initial inspections even more crucial. Again, any investment in automation can pay for itself. When used car demand is high, each day lost in the recon stage is money wasted. Consider streamlining the intake phase with an investment in inspection software such as InspectionNotes from Automobile Technologies. Why waste time entering and transcribing vehicle details and management of recon needs on paper, when a single mobile recon app can eliminate hours of work?
2018 may not be as bumpy a ride as last year, but it’s sure to have surprises of its own. Staying attentive to the market is as close as we’ll get to that crystal ball, and maintaining an efficient operation will keep your dealership rolling smoothly.
2018 has just begun and the economy looks to be off to a great start. A strong jobs outlook and low unemployment means more people are driving again, and these people are replacing their cars. You may have noticed this for a while now at your dealership.
But even with this increased demand, you still have to compete with the larger dealerships. One way to get ahead is to borrow tips and ideas straight out of their playbook. As a software company who sells to auto dealerships of all sizes, we have unique access to everything from a dealer’s operations to their accounting practices. We get to see behind the scenes of dealerships all over the country, and we know what makes the best dealerships successful.
As an independent dealership, you may not have the staff or even the time to always step back and look at the big picture of your operation, but it is an important exercise nonetheless. As you prepare your goals for 2018, you can’t make smart decisions until you take a long hard look at your company financials, and yes that means setting your budget.
Performing these budgeting tasks does not have to be a chore, in fact we are making it easy for you with this tutorial. Consider this budget to be a guideline, a scorecard or a report card for how you are doing financially as a business every month. It will help you make business decisions such as when to buy more inventory or how much to spend on advertising.
Building out your budget doesn’t have to be hard or even time consuming. Many of you are already using some form of accounting program and we have created an excel spreadsheet that you can use or modify simply by clicking the download here:
Why you need a Budget for 2018:
Business plans require financial projections, tax schedules, depreciation schedules, staffing plans and so on. All of this will be spread out over multiple pages and you will need to keep going back and forth between pages. I have found that the best way to start a business plan is to create a single page cheat sheet that has all the numbers in one spot. As you begin to fill in numbers in a business plan, it is helpful to have a single sheet that has all the numbers in one spot.
How to make a budget for your Independent Auto Dealership
The easiest thing is to create a Microsoft Excel spreadsheet. You can create your own or you can download our template below. On your spreadsheet include the next twelve months going from left to right in the top columns. Leave room in the first column to list out each expense.
Next, in the first column, start labeling all of your expenses. It helps to have a couple of recent bank statements handy; you will be surprised at how many little expenses that you forget.
Start with your ongoing business expenses.
The way I like to do mine is start with the bills that you know that has to be paid each month, stuff like mortgage on your buildings or rent, utilities, etc. Put every business expense you have in there. This will give you a good idea of what you need at a minimum to pay break even. Now add a row for each of those columns to tally up.
Note: We have included a column with industry average percentages pulled from the NAIDA used car industry report.
Next it’s time to start entering the employee expenses.
Begin entering values and lines for all of your employees, salaries and average commissions. Again review those bank statements and try to come up with a number for each type of expense that you have. Add a line to tally up each business expense by month.
Inventory and reconditioning expenses are next.
Like most dealerships, you probably have a good bead on what sells in your market, and what your average reconditioning costs per vehicle are. This data can be pulled whether you do all your remarketing in house or you use outside vendors. If you use outside vendors ask for their help in determining an average per vehicle figure and use that as a multiple for how many vehicles you plan to buy in a given month.
Here is where the business owner’s crystal ball comes into play. Obviously, you can’t predict what cars will sell at exact times, but as an existing and successful dealership, you probably have your own data and formulas.
The purpose of this part of exercise is to start determining what revenue is coming in and when. If you offer repairs and service in addition to used cars, you probably have a good idea of what the revenue from the shop is each month as well.
Note: Our spreadsheet gives you the option to use a monthly average/projection, or you can enter specific cars if you want to get really accurate and track your performance.
Next you will need to create a few formulas. First you want to create a line that totals your office overhead along with any salaries.
Subtract this number from the total sales in per month, and you have a fairly accurate idea of what revenue is left for taxes.
Next take this number and apply the following formula: =C54*(1-29%) In is case C54 is the cell with our remaining net cash after salaries office expenses and inventory expenses. This formula takes your net cash and subtracts 29%, which is a pretty good approximation for a small business tax burden and includes state taxes. We recommend that you speak with your tax professional to figure out what the percentage it for your specific situation. Whatever tax rate they suggest simply replace the 29 in that formula with the new number.
In the line below this, add the formula =SUM(C54)-(C55). This gives you the monthly tax payment that you will owe (even though you will pay quarterly). In this instance C54 is the net income and C55 is the tax payment.
Keep in mind this spreadsheet is designed to give you a quick and pretty accurate picture of your cash flow month by month, but it does not factor in things such as depreciations, etc.
We hope you found this to be helpful and we look forward to helping you achieve a prosperous 2018.