Armory Nissan in Albany, N.Y., moved to charging flat fees for financing after a settlement in June with the New York state attorney general. Now, after several months of lost finance income, he's going back to a markup of 1 percent.

The attorney general investigated the dealership earlier this year concerning charges of discriminatory lending. Without admitting guilt, dealer principal Don Metzner settled and agreed to charge the same interest rate markup to all customers. He even volunteered to offer customers the wholesale interest rate and take flat fees from banks and finance companies.

But the move has cost him tens of thousands of dollars, said Metzner in an interview with Donna Harris, Automotive News staff reporter. Although Metzner was able to negotiate higher flat fees with several banks -- even up to $650 per unit -- he still lost a detrimental amount of finance income.

Metzner said that in March, his finance penetration was at 61 percent; he received an average $488 per unit financed. When he moved to flat fees in April, his finance penetration was at 73 percent and he got $277 per unit financed. Interestingly, aftermarket penetration went up from 17 to 36 percent and profit per unit went from $171 to $272.

Metzner asked the attorney general to amend the settlement so that he could charge a different markup for new-car buyers and used-car buyers. The attorney general agreed.

"We spend a lot of time on used-car customer financing to get just one point when the dollar value is as small as it is," said Metzner. "With this change, we'll be closer to normal income. We'll stick with 1 percent for new vehicles and raise the markup to 1.25 or 1.5 percent for used vehicles. We don't want to raise it too high and end up losing customers."

0 Comments