Ultimate Guide to Dealership Growth

As we look to the future of automotive retail, here are a few things to keep top of mind:

Let’s start our journey.

OPPORTUNITY #1

Dealership Trends Surrounding Electrified Vehicles

To prepare your dealership, start by collecting key information by which you’ll set your goals. Talk to your team and your customers to understand any questions or hesitations.

Incorporating Electric Vehicles and a New Service Drive into Your Dealership

Adapt Your Finance and Insurance for Electric Vehicles

In addition to your sales and service strategy, your F&I department needs to appeal to EV customers as well. F&I coverage needs to factor in the battery and electrical systems and adapt to EV maintenance programs, service contracts and warranties.

It's important to reinforce with your F&I teams the opportunities EVs present to enhance profitability and reduce consumer uncertainties. Data collected from dealership sales of nearly 40,000 EVs from 2021-2022 shows an average PVR lift of $125 over traditional vehicles. And while product penetration remains lower for EVs, especially in service contract and GAP, this is an opportunity to further enhance PVR by increasing overall product sales. 

EV vs ICE

Source: JM&A Survey of 1,700 dealerships nationwide

Sharpening these skills now, while EV volume is still relatively low, will greatly impact profitability as sales increase and F&I managers can engage and educate electrified vehicle consumers on products to create more peace of mind.

Keeping Traditional vs. EV in Perspective

You can’t open an industry publication or email without reading about EVs. But what’s the reality for today and in the future?

Planning for the future needs to start today, meaning you should be getting your teams equipped for all the implications EVs will have on your dealership’s operations. For most OEMs, EVs still represent a very small percentage of sales, let alone available inventory. But you can expect to see EVs in your service drive soon, if you haven’t already. Product knowledge in sales, fixed ops and F&I will be required for dealerships to remain competitive. Remember, customers today are more informed about their vehicle than ever before, and they’ll expect your teams to know just as much, if not more, than they do.

Based on current projections, battery electric vehicle sales will not match ICE sales until 2030.

Source: LMCA EV Projection

How to Adapt Your Dealership for Electric Vehicles

EVs will require adaptability and changes across your dealership. Instead of viewing this as a heavy lift, embrace the opportunity for increased profits, as well as a chance to create stronger relationships with new and returning customers. By investing in education for your staff, you can present your dealership as a qualified source of EV information for hesitant consumers, as well as a leader in the industry.

OPPORTUNITY #2

New Car Inventory and Dealership Sales

For the past two years, dealers have been asking when vehicle inventory will return to normal. With supply chain challenges and pent-up consumer demand, many dealerships have looked more like empty parking lots than retail operations. This has presented an opportunity for dealerships to focus on F&I and other profit centers with great success, and PVR numbers have reached record highs, but even this wave of profitability has begun to plateau.

Source: Cox Automotive

Thankfully, many OEMs are starting to see the car inventory shortage resolve, but at different speeds. However, with these eagerly anticipated vehicles also comes rising interest rates, which lessens consumers’ desire and ability to purchase and lease cars. And with limited OEM incentives available, dealers have less flexibility to offer promotions to bring customers in.

CONSIDER THIS

14.3 percent of consumers are paying upwards of $1,000 per month for a new vehicle, up from 8.3 percent the previous year.

Source: Edmunds

Dealers can remain competitive while helping to ease many of the economic pressures, enable customers to afford vehicles and keep car sales up by strategically discounting new car prices.

Market Impacts on Used Car Margins

As new vehicle inventory returns, historically high used car prices are inevitably coming down. While that’s great news for affordability, it also means there is a greater gap risk. In many cases, the downstream impact of that is increased contract prices to offset the potential risk, which affects F&I revenue, since customers will be priced out of the higher cost of the contract.

Manheim Used Vehicle Value Index

Source: Manheim

How Dealership Processes Impact Profitability

Build-to-order and pre-sold vehicles are still a majority of dealerships’ sales, and as more consumers get used to the ability to order online and pick up their vehicle at a later date, processes need to change to increase profitability. Dealerships must adapt to engage customers earlier to source their financing and sell F&I products. Get the support of your whole team to help manage the balance of loan rates, buyer budgets and dealership profits.

With so many market factors at play in automotive retail, it’s easy to get overwhelmed. Especially considering the peak profitability many dealerships have seen these last few years, best practices may have fallen by the wayside.

To remain competitive and protect your future, you must revisit your processes to maximize revenue opportunities. Know the best financing deals available to your customers, because going the extra mile for them and saving them money on interest rates will often pay off in the F&I office and in customer loyalty.

OPPORTUNITY #3

Implementing Automotive Digital Retailing Solutions

Put simply, your competition extends well beyond your physical market and into every direct-to-consumer option, so convenience, ease of use and accessibility matter more than ever before.

The question on everyone’s mind is: what will the retail and F&I processes look like in the next two to five years and beyond? Several OEMs, for example, have followed Tesla’s model, announcing that they will be moving toward an e-commerce, direct-to-consumer approach, mostly accelerated by the surge in electric vehicles. So, how can dealerships maximize their online presence to educate and engage consumers and turn those interactions into meaningful in-person experiences?

Ensure Your Digital Retailing Seamlessly Merges with All Aspects of Your Dealership

What if there was a way to put your top F&I manager in the room for every deal? Implementing centralized virtual F&I is one example of using technology to educate consumers, add efficiency, enhance customer satisfaction and increase profitability. While Virtual F&I is still very new relative to the automotive industry, many dealers have achieved tremendous success in this process.

In fact, data shows that on average, in-store F&I managers are touching 120 deals per month and operating at 46% productivity. Virtual F&I can significantly decrease unapplied labor, while increasing customer satisfaction and helping dealer performance and profitability to go up. This process allows a single F&I manager to deliver deals across multiple stores at one time, while also helping dealers to stay on pace with changing industry trends and consumer preferences.

Virtual F&I is the Car Buying Experience Customers Prefer

Research indicates that dealers are making more money with customers who are completing their F&I transactions online.

In an interview with CBT News, Jonathan Jordan, Director of Retail Strategy at JM&A Group, reinforced that technology adds value in many ways, but to best leverage it effectively, you must double-down on processes and have the right people accountable for implementing a strategy and technology stack that helps you achieve your goals.

How to Use Digital Retailing to Stay Relevant in Automotive

Implementing a full-service, customer-centric operation across multiple channels will help dealers compete in an industry where consumer options are limitless.

OPPORTUNITY #4

Reduce Employee Turnover Rate with Talent Optimization

Recruiting the Right People for Your Dealership

Your dealership is a brand. It needs to be showcased and marketed to the public to earn new business. The same is true for your brand as an employer to potential applicants and future leaders. Viewing employment as a product can help modernize your recruitment processes and market your open positions in the same way you advertise your vehicles.

Retaining Your Top Performers

Once you find a top performer, retain them by investing in them through ongoing training and one-on-one support, as employees who are more confident in their work tend to stay longer. Training your people on how to be customer-centric and overcome objections can build their core competencies and increase profitability.

And while industry factors may ultimately mean people make less money, it doesn’t necessarily mean you’ll be looking for a new person to fill an open role. Research shows that money is not the primary motivator for employees when they consider their employer. Flexibility and schedule have been found to motivate employees to be more engaged in their work, as does culture and workplace dynamics.

How to Impact Your Bottom Line by Focusing on Your Existing Staff

Many of the profitability challenges dealerships face are rooted in talent problems, which is why dealerships need to take a scientific approach to their staffing.

This could be accomplished through effective onboarding, which clearly defines the company’s core values and mission, and by cultivating trust and a positive company culture that is built from the top down. Employees should understand what is expected of them and have a clear road map of how the company is going to help them achieve those goals. Through this methodology, your recruiting efforts can result in increased retention and engagement among your teams.

5 Pathways to Increase Dealer Profitability

With a number of trends driving change across the industry, dealers must use the resources, skills and creativity of their teams to meet those challenges head-on and turn them into opportunities to grow and differentiate. Every department must find ways to innovate and continue putting the customer experience at the heart of every interaction.

An important watch out: By looking at your dealership as distinct and separate areas, you could create silos and segmentation, which can limit progress rather than enable it. Instead, the best path forward is to think of your store as a holistic entity where processes and talents can be aligned across all areas of your business as a complete and repeatable cycle.

This way, sales, service and F&I can play an active role in the process, cross-train and find efficiencies. You’ll find the result is an engaged workforce that values and understands the role each person brings to the bigger picture, earning your dealership more revenue and greater customer satisfaction.

To effectively make this change, dealerships should focus on these 5 pathways to profitability:

PATHWAY #1

Future Profitability in Finance and Insurance

In the last few years, F&I has seen growth in ways the industry has never seen before. The trends we covered above played a huge role in dealers’ ability to earn more profit on the front- and back-end of each deal, further cementing the F&I department as a core revenue driver for dealerships. However, as we begin to shift back to a more normal state of operations, it’s important to consider what that will mean for F&I to keep it an enduring profit center.

Key Factors in F&I Success

Building a sustainable F&I program requires aligning your goals and success metrics with flexible but focused solutions.

Key areas you should evaluate to ensure you’re maximizing F&I profitability include:

Customer-focused experiences – implement modern retail strategies to evolve with consumer demands and expectations, including Virtual F&I

Ongoing training and support – identify opportunities for growth and achieve your objectives with advice and guidance from F&I experts through automotive F&I training

Deal structure and wealth planning – build your business for the future by making the most of your portfolio, commissions and incentives

Process enhancements – design and implement processes to boost performance, efficiencies and compliance at your dealership

Product mix and menu options – a complete and customer-centric menu for new, used, leased and EVs can help add value to each deal

How to Improve F&I Performance

With so many areas to review and optimize, relying on an experienced partner to help evaluate your dealership processes, goals and key F&I performance metrics can go a long way in accelerating your growth opportunities.

A good starting place when thinking about F&I is to determine how you are tracking against industry trends of key F&I metrics such as PVR, PPD and penetration on core products like service, maintenance and GAP.

F&I PVR

Source: JM&A Group Automotive Trends Report

While you may see PVR level off compared to last year’s performance, there’s no cause for alarm. What you should be mindful of when looking at these trends is identifying opportunities to increase product penetration and PPD in order to maintain overall F&I gross as the industry regulates.

PPD

Source: JM&A Group Automotive Trends Report

The Importance of Having the Right F&I Provider

Having a partner that understands your unique market and business needs and has the tools and experience to help you build a sustainable program can help keep your numbers moving in the right direction and plan for your long-term growth, even as the markets shift.

F&I is changing, and dealers that evolve with it will outperform their competitors on conversions and customer loyalty. To continue on an upward path, you must grow and transform your offerings to flex with customer needs and buying preferences.

PATHWAY #2

Find Revenue Growth in Fixed Operations

Most dealers focus their time and efforts on front-end sales, but equally as important is your dealership service department processes. As you consider your growth goals, your dealership fixed operations should continue to be reviewed and assessed as a revenue driver. But no matter what area of your business you’re looking at, it should always be through the lens of your customers.

Quality Customer Experiences in the Dealership Service Drive

Improving customer satisfaction is extremely important for strengthening your dealership’s fixed operations revenue potential.

Communication is a simple but important factor that can go a long way for your customers, earning you trust and improved CSI. Providing your customers with personalized updates while their vehicle is being serviced, backed up by qualified, efficient and personable service advisors, will help differentiate your dealership’s service drive from the other repair facilities down the street and bring you repeat business and referrals.

Ways to Reduce Turnover in the Service Drive

As we navigate a shortage in technicians as well as vehicle parts, thinking about how your dealership can best serve customers while also retaining your existing team in the service drive is particularly important.

To help you balance being understaffed while needing to meet the high volume of vehicles, here are two suggestions for boosting capacity on your fixed ops team:

Navigating Inventory Shortages and Aging Vehicles

In a time of high costs for new and used vehicles, consumers are holding on to their current cars longer, which means aging components will need servicing. Understandably, these can become costly for customers, which may deter them from getting necessary service. Follow up with consumers who decline servicing, by “giving them options of how you can build out a plan to get their car up to manufacturer’s specifications,” says Craig.

Adapting Service Drive Processes for Electric Vehicles

As electric vehicles continue to enter the industry, your service drive will have to adapt to the ever-evolving parts – especially how your dealership will offer maintenance and service and retain customers who favor this new powertrain. It is a big shift that will require financial investment as well as specialized training and equipment as sales volume continues to increase over the next several years. To be set up for success, dealers need to be preparing their service drives now, and having the insights and expertise of specialized consultants can help accelerate that preparation.

A personalized approach to your dealership service strategy that aligns with your business goals will help boost revenue, strengthen processes and grow your dealership.

Especially in areas of automotive evolution, working with a partner that offers comprehensive dealership support and guidance can make a big difference for your dealership as a whole. Fixed operations, sales and F&I need to work hand-in-hand to create a successful, cohesive dynamic for your staff and customers.

Tap into fixed operations for continued growth →

PATHWAY #3

Dealership Training and Development Opportunities for Your Leaders and Teams

Given how fluid the automotive industry continues to be, it’s clear by now that the only constant is change. So, to keep your operations agile and your teams at peak performance, you must prioritize ongoing training and development courses at all levels of your organization. Modern, effective training is much more than a one-size-fits-all approach, and it must also extend beyond finance and insurance training and automotive sales training. Curriculum must advance and adapt with the realities of the dealership and customer of today.

What Kinds of Dealership Training Programs are There?

Today’s environment requires flexibility, and thankfully there are a number of participation options available to those seeking dealership training courses, so you can select what best suits you and your teams.

Plus, aligning training to your dealership’s growth goals for the year ahead will keep your teams engaged and connected to the overall vision for the future.

Talent and strategy should be seen as channels that are firmly linked in your dealership growth plan. Successful companies will coach, develop and cross-train their employees in a way that enables them to leverage their strengths and connect them to long-term business goals. Data shows that investing in training your team provides significant ROI – even before promotions occur, lateral moves and stretch assignments can increase engagement by up to 30%.

CONSIDER THIS

An annual training budget of $3,800 per person drives an improvement in customer satisfaction, productivity and employee tenure. Sounds like a win-win.

Effective Cross-Department Training

Creating a vision everyone can rally behind is a challenge many dealerships struggle with, but achieving that goal begins with ensuring your teams are aligned and accountable – and that starts with leadership. Knowing your strengths and areas of opportunity is the basis for a strong dealership training program with long-term payoffs, including increased profitability and employee retention.

With the support of an established provider with broad offerings covering many areas of the dealership, you can develop a customized training program. A skilled facilitator can recommend course work and design curriculum to suit your team’s needs so your leaders can champion training efforts and hold teams accountable for applying their learnings to their goals.

Hands-on Training Beyond the Classroom

Your people are the heart and soul of your business and your competitive edge. To help keep their skills updated, offering advanced training that follows them from the classroom and into the service drive, on the sales floor and in the F&I office is the next step in their development. In these real-life situations, your team can receive side-by-side support and help align skills to key metrics like customer satisfaction and PVR.

With the number of options available in the training space, make sure you select a training partner that can offer not just variety, but breadth and depth in curriculum that’s suited to your goals for sales, fixed ops, F&I and most importantly – compliance – in the evolving world of data protection and security measures. And, if you’re looking to build an in-house training program, you can also find providers who will create it alongside you with your brand, core values and mission in mind.

By working with a provider that takes an intentional, comprehensive look at your business and has expertise in all areas of dealership operations, you can retain and grow your teams’ skillsets and increase profitability across key departments. 

Harness the Power of Dealership Training →

PATHWAY #4

Attracting and Retaining Employees Drives Dealership Success

Finding and keeping your star performers is one of the keys to dealership success. Employee turnover, while not currently a notable challenge for automotive retail due to record profitability, is often a barrier to success and a significant dealership expense. Let’s compare the costs between hiring and retaining talent.

The Cost of Buying vs. Building Talent

It is estimated that the cost to recruit a new employee increased to $15,000 in 2022 compared to just $5,000 in 2019. And that doesn’t account for the lost revenue and internal resources that are redirected to reviewing resumes and interviewing during the 30+ days it takes on average to fill that open position. All told, it can cost upwards of $56,000 per hire.

Source: JM&A Group Data

In contrast, building your talent pipeline from within can cost as little as $4,000 per year, taking into account an annual budget of $3,800 per person in training and a few hundred dollars for software licenses. Plus, when you promote from within, you can fill vacancies faster, increase employee loyalty and ensure they’ll be able to jump right in since they’re already familiar with your teams and processes.

A Modern Approach to Dealership Hiring

Relying on a job posting to grab an applicant’s attention is no longer enough for your talent acquisition strategy. Employee recruitment should be viewed in the same way as vehicle sales marketing. By creating a talent funnel and treating the applicant journey like the customer journey, dealers can create a top-notch hiring experience that inspires applicants to choose them over the competition.

Utilizing a talent optimization platform like The Predictive Index, which takes a scientific approach to people strategy, can be an ideal resource for companies looking to create solid teams, build a noteworthy culture, make objective hiring decisions, foster engagement and inspire greatness.

Focus on Retention to Build an Engaged Workforce

Of course, the work doesn’t end once your new hire is in place. Like any good relationship, that of an employee and employer requires continued commitment and nurturing to build loyalty and sustain an engaged workforce. You have to continue to invest in and develop your team to keep them. To build internal talent, use a comprehensive toolbox of training, skill development opportunities and personalized coaching, or utilize an employee engagement consultant to support the retention process and to best achieve specific business goals.

Create a Talent Program that Lasts

Recruitment and retention goes far beyond a necessary task to keep your dealership running and get tasks completed. Building an effective, lasting talent program can increase productivity, improve customer satisfaction and drive long-term team performance. Growing your dealership for the future requires building your bench of talent, creating specific job targets, preparing rising leaders and aligning teams for collaborative growth.

You don’t have to do it alone. By talking to talent experts and taking a data-backed, innovative approach, you can hold onto top performers and reduce the resource strain on your teams. That means you’ll spend less time hiring and more time growing.

Know the hidden cost of employee consulting →

PATHWAY #5

Dealership Insurance Services and Risk Management Consulting

Being proactive and anticipating shifts in the automotive industry is one of the hallmarks of successful dealers. And that extends into how you protect your business, your people and your property. The right mix of insurance and risk management solutions is not only part of a responsible business model, it can also help safeguard your bottom line and help you retain your employees. As much as dealerships re-evaluate their processes when it comes to revenue generation, investing time in reviewing insurance coverage and policies is an often-overlooked area.

Benefits Packages are an Employee Retention Tool

You can make the biggest impact for your business with the plans you offer your employees. A great way to reduce turnover and keep your people engaged is by offering affordable, flexible benefits packages. From 401Ks to health, dental, life and optional coverage plans such as 529 College Plans, you can build a mix that appeals to your dealership teams.

One-on-one employee benefits enrollments can help your teams plan for their health and savings goals, as well as increase overall participation to ensure they have the coverage they need. With options best suited for them, your teams can feel confident taking advantage of comprehensive, competitively priced insurance.

Stress-Free, Comprehensive Dealership Insurance is Possible

The first step is to assess your needs through a comprehensive review of your business, which will help reveal the areas of greatest opportunity to reduce your risk and add necessary coverage. This could include a garage liability policy for vehicles on your lot or upgrading your healthcare and 401k plans to help retain your team members.

By getting coverage for all areas of your dealership from one agent, rather than privately going to market, you increase the likelihood that you’ll be able to keep your coverage consistent from year to year and not pay a premium for it. This stability pays huge dividends for your business and with something even more priceless – your people’s confidence and trust.

Cybersecurity is an Emerging Need for Dealers

One area many dealers overlook is their information security, and how they protect the sensitive data of their business and customers. Cyber risk assessments and insurance policies are a growing area of interest for dealers – and for good reason considering the implications of a data breach.

Getting a complete picture of your dealership’s needs from agents who specialize in automotive is a great way to assess your overall coverage options. Build a more secure and reliable operation that appeals to your employees and better protects you from risk.

Get comprehensive insurance delivered simply →

Dealership Trends in a Changing World

The automotive industry will continue to evolve, so now is the time to implement comprehensive solutions to help you stay ahead of the curve and create custom approaches to success based on your individual goals. Growth comes to those who are prepared to adapt and remain agile in a changing world.

Regardless of where the path leads, one constant will always be the need to create and provide truly exceptional customer experiences.

Having the right roadmap, with the best people, processes and products in place, will allow you to navigate the road ahead and deliver on that goal, while also helping to boost your bottom line.