Most dealers are performing reasonably well during the pandemic. Many of our clients will turn a profit in May. One client, with a handful of stores, will turn a combined profit of $800,000 in May. Another client sold 100 vehicles for the first time. Would anyone have predicted such results at the start of the pandemic?
So how did this happen? We continually hear the same comment from dealers. They are surprised at the number of vehicles sold with a limited staff. All dealers experienced significant layoffs by the end of March. Stronger performers in sales, F & I, and the BDC department were retained. During difficult times, it is evident which employees are fully committed to your business and provide the most benefit.
One dealer sold 75 vehicles in May of 2020 as compared to 95 in May of 2019. The dealer had 5 salespeople, 1 F & I manager, and 2 BDC staff working as compared to 10, 2, and 3 in May of 2019, respectively. Basically, the dealership sales only dropped 21% with half of the staff working.
What did that dealer learn? First, customers are comfortable transacting on-line and communicating remotely. In this example, the dealership resides in Massachusetts and the showroom was required to be closed. Second, the average dealership has been spending approximately $250,000 annually to operate the BDC department. Since the BDC is now handling the lead generation process, the sales staff must sell more vehicles to cover the additional expense. Salespeople can and should sell more than ten vehicles per month. I suspect this dealership will not return to staffing levels of prior years in its sales department.
Many dealers are “holding” stronger grosses. Obviously, inventory levels have and will tighten as production of vehicles has halted or slowed. Why would you give away vehicles at “short” grosses when there is an inventory shortage?
In conclusion, dealership sales and service have slowed, but not dramatically. Expenses have been reduced significantly. This combination has resulted in operating results that are better than expected. PPP loan forgiveness will also booster operating results. These factors will allow dealers to emerge from the pandemic in decent shape with a lot of lessons learned.
If you have any questions regarding this article, please contact Paul McGovern at PMcGovern@DowneyCoCPA.com or at 800-849-6022.
