Mechanics of the car dealer business

Off-Ramp
21

Pre Covid it was typical to see new car sales generate 50-60% of revenue but only 20-25% of gross profit.

22

Hey Matt - slow down - @max_g does not know anything either

You can read all the annual reports - always need color

@max_g just regurgitated points in the report using his own words

I’m almost certain this post isn’t relevant to either one of you - my apologies

23

Fair enough.

Read this to understand the dealer business better:

4 Likes
24

This is the Matt I like - providing good insights via a windy back road

I’ll read it - thank you - seems interesting

1 Like
25

WOW
$2,700 PVR on F&I contracts

let me restate that
averaging $2,700 in profit per vehicle retailed in F&I alone

I remember the days reading old F&I forums when $1,500 per copy was considered good. And that $2700 figure is likely Net of chargebacks (aka warranty/product cancellations and early loan payoffs)

I know this probably includes dealer reserve on marking up buy rate but it is mind boggling that they are grossing $8,700+ on average for a new car sale when you include F&I. but then again I as a leasehackr am not an average consumer

1 Like
26

3100 average $$$$$

2 Likes
27

Good stuff guys - business is interesting- we should all delve in and provide information/ tidbits

Become a more sophisticated platform plus we all learn

One day we should all be able to walk into a room - talk to a dealership owner and understand every aspect of his business

Numbers + color will do that

2 Likes
28

wow

then again I really shouldn’t be surprised with the amount of posts I see here and elsewhere about car payments etc…

29

Ballers on LH but penny pinching everything :joy:

2 Likes
30

When you open your BHPH hire me :upside_down_face:

2 Likes
31

Good business - charge high rates - 23% APR on a 5 year loan with collateral - first Lien - repo anything that doesn’t pay

I was at a July 4th party in the Hamptons- the guy who owned the house purchases bad debt for a fraction of the original amount and uses data to collect on it

I saw leo, Gigi, Bunch of hotties, shitty part was I was going up against really wealthy guys

One girl ended up at a nfl players house the next am

But yeah it’s a good business if you can stomach it - money is in financing used cars not selling

2 Likes
32

Count me in to go thru the data not down on the repos

You took the wrong flight bro @TheBigTuna

2 Likes
33

That is exactly what I expected to read from slate. :face_with_hand_over_mouth:

1 Like
34

Exactly- finance the deal and collect your distribution every month

Just numbers on a sheet - contract everything else (sales, collections, repo, loan servicing)

1 Like
35

The days of a normal guy owning a dealership are growing shorter and shorter. Most dealers are owned by a mega group (Penske, Autonation, Lithia, Group 1, Asbury Automotive) or by a large regional group (in NJ, that might be Paul Miller, Open Road). The days where 1 guy or a group of a few people buy 1 dealership is quickly dwindling unfortunately.

I do not currently do BHPH, but have looked into it and it seems like a good gig if you have a solid retail location. I would definitely buy my own truck and hire someone to do repo’s though. You will lose a lot of money farming out repo’s. I used to own a towing company, and getting one to do a repo is expensive. Insurance is a huge hurdle though - it cost $70k/yr/truck to do repo’s back in 2016/2017 compared to $25k/yr/truck for just towing. Not sure what the rates are nowadays. There are also very few insurance companies that underwrite towing policies, and they don’t always underwrite policies (like Progressive did 1 year on, 1 year off for a long time for issuing new commercial policies for Towing).

Definitely need GPS in every car you sell, and maybe make an extra key if possible/cost effective just to have one in case you need it.

3 Likes
36

Relative has a towing insurance policy and it’s 4k for liability yearly in CA :skull:

37

That doesn’t seem possible. Some folks liability policies on a civic are more than that. :face_with_hand_over_mouth:

1 Like
38

Had to call to get the correct number
Just renewed the policy it went up to 57XX for 23/24

He was at 4kish
20+ years in business

1 Like
39

Yeah, that seems insanely cheap. I’m not sure how he pulled that off…Does that include on hook coverage?

I’ve never seen a policy in NJ talking to my friends/competitors that was less than like $12k/truck, and that was doing some sorta sketchy stuff like lying about hours of operation and radius traveled and stuff like that along with having extremely low limits. You need at least $750k liability with most contracts requiring $1M+, I would also have on hook of at least $100k, if not $250k, and garage keepers is separate as well. Most towing companies need 3 different policies:

  • General Liability
  • Commercial Auto
    • Including On Hook (to fix damage to a car you are towing), Liability (damage to other vehicles on the road), Full Coverage on your truck (to fix your truck)
  • Garage Keepers
    • To cover damage to vehicle you tow that are being stored in your yard

It could be that he doesn’t carry full coverage on his truck and maybe insurance is cheaper now if more companies are underwriting. Anyway, if insurance really is that cheap…maybe I need to get back in the game hahahah!

1 Like
40

BHPH is a brutal business. I had a colleague who owned one previously and sold it. You spend too much money repoing cars and fixing them again once recovered. Plus everyone there is crazy from the customers to the managers. What I found interesting was at least at his dealer, the down payment was the salesperson’s commission. So if they got $500 down, that was their commission on the deal.

6 Likes