The costs of not moving inventory affect a dealership in a variety of ways.
- Direct dollars spent on used bikes. Floor plan costs, as we all know, can add up at a geometric progression. That is, with the current prime rate at 8.25 percent and floor plan arrangements typically set at 1 percent to 3 percent above prime rate, and the administrative charges per vehicle of floor plans, floor plan dollars add up quick. Presuming a unit has a $12,000 cash value at 10.25 percent, divided by two, plus $50 per month, in six months a dealer could have spent more than $900 in floor plan costs.
- Add to that the out-of-pocket expense for lost opportunity dollars — gross profit. In the $12K unit example we presume a 20 percent profit equals $2,400.
- Lost additional income from no F&I earnings. Presume an average F&I dollars of $1,500 per unit.
- Lost sales on parts, accessories, clothing and service-labor dollars by not selling the unit — which could add up to as much as $3,000 per sale.
These dollars add up to more than $7,800 for keeping a vehicle in inventory for six months — dollars spent and dollars not yet earned.
Sure, you have to invest money to make money. But stale inventory in any department is the big bad wolf of any dealership. The goal is to turn it to earn it.
Job Description. The ideal candidate for an association-level used bike coordinator may not be someone from inside your association's ranks. You also want to appoint someone that will conduct business in an objective manner, not favoring one dealership over another.
You also want a person with general knowledge of all motorcycles. He or she should have an appreciation for details, and I recommend seeking a person of maturity so that actions can be taken with the badge that only a seasoned veteran can display.
As I've suggested before, I think a combination of base salary plus commission tied to performance is the best formula for paying the used bike manage at a dealership. A state association may want to amend this for its own purposes.
A talented used bike manager will more than pay for himself by keeping inventory fresh.
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