Dealership Operation Guidelines

My guidelines are minimal and not permanent. They are often tweaked (only for the better). These include

Market Share Requirements

At my company, I try to ensure that all my new vehicle sales market share must equal or exceed the national penetration. For example, if the MFGR national average of the market share is 13%, you may need to look at it by region.

I know that different pockets of the country will be higher for domestic versus imported vehicles. For more information, click here

Used and New Vehicle Sales Ratio

I strive to maintain a 1:2 ratio of used to new vehicles at my dealership.

Customer Satisfaction Index

My company is dedicated to ensuring that the CSI of my dealership is 100% of the zone or national 12-month average.

Net Profit to Sales

I am committed to ensuring that my dealership’s net profit to sales percentage equals 4-5% of the total retail sales. The NADA and NC< target is roughly 4% to 4.5%, as 5% may create some issues.

Net Profit to Gross

My dealership strives to deliver 28% to 30% based on the total gross profit in all departments.

Compensation for Salesmen

For my salesmen, I promise them 20% of the front-end gross whenever they sell a car. Additionally, they are entitled to 15% of the total gross on the front and back, which includes a doc fee.

They can also expect a supervision expense of 12% of the total gross and other salaries and wages equal 7% of the total gross. In addition, they also have a clerical expense of 2% of the total gross.

Total Personnel Expense

My dealership’s total personnel expense equals 35-38% of the total gross. The split is 15% for the salespeople, 8% for the sales managers, and 4% for the office personnel, equaling 27% total. The remaining 8-11% is split between payroll taxes and healthcare.

Other Associated Costs

The various associated costs for my dealership include the following:

  • Cash Management – Deposit 50% of the Current Profits
  • Advertising Costs – 8.5 to 10 or 25% of the Variable Gross
  • Office Supply Costs – 0.6% of the Total Gross
  • Contracts in transit - $0 Over 10 Days
  • Policy Work – Parts and Service is 1% of the Total Gross
  • Outside Services Costs (Excluding Management Company) – 2.5% of the Total Gross
  • F&I Gross Income - $1,300 Domestic and $1,150 Import Per Retail Unit
  • F&I Chargebacks – 15% of the Gross Income
  • Finance Penetration – 75-80%
  • Ancillary Products – 30% of Finance Sales
  • Service-Contract Penetration – 50% of Retail Sales
  • Dealership Gross Per Employee - $9,000 to $9,500, NADA and ACAR Equals to $9,300 per Employee
  • Part Sales Per Parts for Employees - $40,000 to $45,000

New and Used Car Inventory

My dealership receives a new inventory of vehicles every 45 days, depending on volume and brand. For example, you must sell Toyota vehicles inventory to receive new cars.

For our used car inventory, we refresh our stock every 30 days at retail or 23 days for V-Auto cars.

Parts Inventory

My dealership restocks our parts inventory every 30 to 45 days at cost. This results in more than $300,000 in sales at $210,000.

Additional Thoughts and Resources

A great gross number on all packs, doc, and factory money on new vehicles includes total gross before F&I. This is in addition to $1,500 domestic and $1,200 on imports. The great real gross number on used vehicles consists of all packs, recon, and doc is $2,800 on domestic and $2,500 on imports, including F&I.