And it’s doing just that. On a per-deal basis, not counting F&I, service or parts profits on those used units, the used units average $1,400 Gross Profit per deal in November and $1,133 YTD compared to new units at $897 in November and $934 YTD. “That’s 22 percent more profit per deal,” Shenk says. “And at that rate, we need to sell more than 122 new units to equal the profits on 100 used. The used attract a different buyer and actually help us increase our new unit sales count.”
With unit sales revenues increasing 48.2 percent year-over-year, it was nice to see the F&I revenues increasing even more. F&I net revenue (or gross profit) was $19,372, up 62 percent over the $11,961 reported in November 2010. As a percentage of total dollars, F&I revenue was 4 percent; that compares to only 3 for the best Top Gun dealers.
F&I improvements. Even though it is better, F&I is still by far the weakest area of the dealership. Two steps were taken to improve F&I performance. First, a new salesperson now is selling F&I, and second, on-site F&I sales and compliance training was conducted by an outside trainer.
“I am committed to getting to a higher profit per vehicle sold by at least another 20 percent,” Shenk notes. “A really strong F&I department, like a strong pre-owned department, also helps sell more new units at profit and that’s what we want.”
"I am committed to getting to a higher profit per vehicle sold
by at least another 20 percent."
The performance in parts and accessories also improved sharply from November 2010 to November 2011. Total gross profit in November was $20,896 on revenues of $70,920, up from a gross profit of $16,447 on total revenues of $57,449 in November 2010, an improvement of 27 percent in gross profit.
“To thrive in the new economy, every department must be a sales department, and we must move beyond happy customers to loyal customers,” Shenk says. “The real change was in customer count and number of items and size of average transaction.”
In November 2010, the dealership had 444 parts customers with an average of 1.87 items per transaction for $48.19. This November, it had 510 transactions at 2.10 items per and $56.58. “If a customer has a good buying experience,” Shenk says, “there is a good chance they will return. If they have several great buying experiences, they become loyal — and that’s when they start telling others that your dealership is the place to do business.”
However, the service department didn’t keep up with the rest of the operation. Revenues for the month were only $28,530, off 7.4 percent from the $30,825 reported in November 2010. Productivity for the month was only 70 percent, compared to 76 percent in November 2010. The 144 potential service hours lost resulted in lost revenue of $12,270 for the month. By comparison, there were 117 lost hours in November 2010, resulting in lost revenues of $9,975.