AUTOMOTIVE ADVERTISING & MARKETING

Gross Profit Margins

How Dealers Can Combat Low Gross Profit Margins

JKRAdvertising / Automotive Advertising Advice /

April 4, 2016

A big issue confronting auto dealers in recent years is lower gross profit margins on sales of automobiles. Lots of variables come into play, of course, such as the brand(s) sold, the marketplace in a given market and the business acumen (or lack thereof) of the management staff … but almost everyone across the board will tell you their profit margins aren’t what they once were.

Why Low Gross Profit Margins?

A 2015 article in Automotive News took on this very topic, saying the following: Lurking behind the results from five publicly traded dealership groups last week was a disturbing trend: Profit margins on new-vehicle sales fell at all five companies. Some dealership group executives blamed tougher competition, particularly among mass-market import brands. Others cited shifting consumer tastes and lower gasoline prices. Still others said there was a drive for volume over margins, and they defended that trade-off.

There it is! In order to sell more cars, they sacrifice profit … and many dealers are more than willing to do so. But here’s the thing: you don’t have to settle. You should want your dealership’s ads to contain everything necessary make a potential customer want to come buy a vehicle from you – and ask for the exact offer that they saw or heard in the commercial. (Hint: A dealer wouldn’t make that offer unless it was a moneymaker for them … and that is where the improved gross profit margins happen; when your ads bring in not only more customers, but better customers, too!)

FREE Advertising Review

If meeting and exceeding your sales goals (and increasing gross profits at the same time) sounds great to you, call us today. Don’t be satisfied with status quo when there’s something far better out there for you and your dealership. Want to know how JKR Automotive Advertising does it? Call Eric Tigner today at (321) 397-0777. For your efforts, we’ll send you a no-strings-attached FREE advertising review that tells you all about the effectiveness of your current strategies – and a whole lot about your competitors. This information alone is worth your time … and then some!

JKR Automotive Advertising: We Move Cars.

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Post-Pandemic Dealer Gross Profits are Down – But They Don’t Have to Stay There!
March 13, 2024
It is no secret that dealer gross profits per vehicle are down sharply in the post-COVID automotive world. According to a recent article in Automotive News, gross profits of the six largest publicly traded dealership groups plunged significantly from Q4 2022 to Q4 2023. One of them was actually down 35% per vehicle!

The article explains: High interest rates, more expensive vehicles and a steadier post-pandemic supply chain continue to soften demand and bring it closer to pre-pandemic levels. Still, new-car buying has remained strong overall …

This means that, while sales volume is similar, overall bottom lines are lower for many dealers due to the reduced gross profits. What about your dealership?

Being Realistic
It’s time to turn the page! The time for dealers to simply be order takers for people willing to pay MSRP for a vehicle (and in some cases more) has passed and dealers have to work hard once again to achieve acceptable gross profits.

Selling a high volume of cars doesn’t control gross profits, no matter how much you wish this was the case. Correct processes and menu pricing – and strict adherence to them – do!

What kind of processes?
∙ Slow down the transaction! Your sales staff has to once again sell the customer on the features and benefits of every new and pre-owned vehicle on your lot.

∙ Your salespeople and managers should devalue the customers’ trade-in value (politely, of course) as much as possible. After all, if the customer expects you to lower your price, shouldn’t you be able to do the same on their trade? Remember, you’ll have to fix it up, put your name on it and resell it to someone else with all the tenacity you would a brand-new car. So make sure you buy it right … because the profit is made when you buy it, not when you sell it!

∙ To that end, management should be ready and willing to leave the desk and do thorough walk-arounds on each trade to ensure the best outcome for the dealership.

The Cure for Low Gross Profits
If you are like a lot of dealers these days, you could use some good news. Here it is: while you may not have the capability to achieve profit margins similar to those you enjoyed during the pandemic, they could likely be improved. JKR’s clients enjoy the benefit of attracting not only more customers, but better ones, too!

If meeting and exceeding your sales goals (and increasing gross profits at the same time) sounds great to you, you need to call us. Don’t settle for reduced gross profits when help is out there to get you closer to where you’d like to be.

Want to know how we do it? Reach out to Senior Partner Richard Brauns (407) 701-4233 or Partner/Vice President Jon Albert (407) 718-2494 today.

JKR Automotive Advertising: We Move Cars.

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