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On the Point

10 Ways to Improve Gross Profit

Da Man says if your grosses suck, it's your own darn fault. He lays out 10 ways to make sure they don't.

February 5, 2016

Do you work for one of those dealerships that believes in this hype about it being impossible to make gross selling cars in today’s market. The manufacturers allows us to mark up new cars 3% to 5%, but then these overpriced vendors promise car buyers savings of $3,500 on a $20,000 car.

Manufacturers aren’t completely innocent, however. They continue to ratchet up those stair-step programs that have dealers chasing the money as they unload vehicles at losses in order to meet unrealistic volume objectives (Nissan). Then some idiot said the industry needs more transparency, which really means drop your pants and give it all away.

I’m not saying we need to hit home runs on every deal, nor am I advocating for deception to make gross. What I am advocating for is discipline and process, with a smidgen of persuasion and finesse thrown in. The following are 10 ways to do just that.

1. Get More Down: As I’ve often said, most consumers are payment buyers, which is why payment and down payment are more critical to making a sale than price and trade. In fact, if you’re seeing low grosses at your store, I bet your “cash in deal” on finance deals is also low. So if you want to raise gross, ask for bigger down payments.

2. Sell More CPO: Certified pre-owned cars have higher gross appeal than new or used. Train your salespeople to fully explain the benefits of CPO units, and make sure to certify a large number of units and isolate them from the rest of your inventory.

3. Compare CPO to New-Car Pricing in Advertisements: This is as critical as making sure lot signage clearly distinguishes your CPO units from the rest of your inventory.

4. Switch Consumers to Leases at Full Markup: Your salespeople need to be able to perform a great lease-benefits presentation if your retail buyers balk at the retail figure quoted. This tells your customer the quote is the best you can do. If the customer decides to buy, you’ll be in control at a higher number.

5. Dig In: Too many managers and salespeople can’t say, “No, I won’t do that.” They just keep discounting until there’s nothing left. Dig in early and give the customer the impression that the deal quoted is the best you can do.

6. Hold Back on the Trade: I know many of you weenies gasp at the thought, but we all know that’s one way to make a profit. And besides, we all know the consumer is trying to buy my car for substantially less than it’s worth. There’s nothing immoral about doing the same to them to make a profit. I’m not talking about a ridiculously low figure, but I’m not opposed to offering $1,000 or less than we appraised the trade for.

7. Have Options Available: We know a high percentage of consumers do not drive home in the car they thought they wanted, so have two or three vehicle options ready when an appointment arrives. They should include the vehicle the customer inquired about, a similar model with more or less equipment, and a CPO vehicle. And always have an appointment’s cars upfront, clean and separate from the rest of the dealership’s inventory.

8. Accessorize: When I was a salesman, I could sell a car at invoice or more and talk the customer into buying all sorts of upgrades at full price. Customers rarely argue with full price on accessories after they beat you to death on the deal.

9. Trick It Out: Turn those trucks and hot sports cars into emotional magnets by outfitting them with performance wheels and tires, bumpers, bed accessories and other aftermarket mods. Remember, pre-mounted accessories build gross and add to the amount financed for lenders.

10. Go For It: The reason most dealerships can’t achieve big grosses is because their salespeople and managers are believing the hype that it’s impossible to make gross selling cars today. Truth is, the No. 1 reason deals are blown is fear of the money.

Stop making excuses. Sure, the Internet and vendors are pricing our cars while manufacturer incentives continue to erode grosses. But I’m here to tell you there are dozens of dealerships representing every make and model that are achieving both high grosses and customer satisfaction. Suck it up buttercup, and go watch my “How to Work a Car Deal” video on YouTube to get a new attitude.

Jim Ziegler is the president of Ziegler SuperSystems. Contact him at [email protected]

Comments

  1. 1. RE [ March 23, 2016 @ 08:18AM ]

    I like it....don't be afraid, go get it, get that GP!!

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Author Bio

Jim Ziegler

President & CEO of Ziegler SuperSystems

Jim 'Da Man' Ziegler joined the magazine in 2011 to deliver his On-the-Point message about the car business to dealer principals and store managers. He'll offer strategy advice on everything from sales and F&I to marketing in the digital age. Catch him every month at www.fi-magazine.com.

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