The Profit Squeeze: 5 Costs Dealers Are Reducing — And Why It Matters | Donald Kemp, General Sales Manager at Stowasser Buick GMC
About this episode
Donald Kemp, General Sales Manager at Stowasser Buick GMC, shares insights on navigating the current automotive market's challenges, including tight margins and fluctuating vehicle valuations. He discusses strategies for reducing vendor costs, turning used inventory quickly, and enhancing finance and insurance (F&I) performance by educating sales staff on product offerings. With a focus on competitive pricing and customer engagement, Kemp reveals how these tactics are crucial for maintaining profitability in a volatile market. The episode provides a practical look at dealership operations during uncertain times.
Kelly Blue Book
"I'd say the way Kelly Bluebook and everything's jumping up and down. So that 21 day turn is very important."
Kelly Blue Book is a trusted source that helps you find out how much a car is worth. People often use it to check prices for buying or selling cars.
Kelly Blue Book is a vehicle valuation and automotive research company that provides pricing information for new and used cars. It is widely used by consumers and dealers to determine fair market value for vehicles.
21 day turn
"So that 21 day turn is very important. That's that's kind of our goal right now is getting in price competitively and try to just turn as fast as we can."
A '21 day turn' means that a car dealer aims to sell a car within three weeks after they get it. It helps them keep their inventory fresh and make money faster.
The term '21 day turn' refers to the goal of selling a vehicle within 21 days of acquiring it. This metric is often used by dealerships to measure inventory turnover and sales efficiency.
margins
"...I am curious how it's impacting your margins. Many, many people are in your shoes, right?"
Margins are the money a dealership makes after buying a car and selling it. If they buy it for less and sell it for more, they have a good margin.
Margins refer to the difference between the cost of acquiring a vehicle and the price at which it is sold, impacting profitability for dealerships.
used inventory
"...quality used inventory has never been tighter. Right now in our market..."
Used inventory means cars that have been owned by someone else before and are now for sale. Their prices can change based on how many are available.
Used inventory refers to pre-owned vehicles available for sale, which can vary in quality and price depending on market conditions.
GMC
"...we're a GMC store. So we are really heavy in trucks and SUVs and that's kind of what..."
GMC is a car brand that makes trucks and SUVs, which are larger vehicles often used for transporting goods or people.
GMC is a division of General Motors that focuses on trucks and SUVs, known for their durability and capability.
trucks and SUVs
"...we are really heavy in trucks and SUVs and that's kind of what we tend to shoot for in the auction..."
Trucks are big vehicles used for carrying heavy loads, while SUVs are spacious cars that can carry more people and gear. Both are popular for their strength and space.
Trucks and SUVs are larger vehicles designed for transporting goods and passengers, often favored for their versatility and capability in various driving conditions.
service contract
"...where the service contract cost has gone up and the price point of a service contract on, you know, an $80,000 Sierra is high."
A service contract is like an insurance policy for your car that helps pay for repairs and maintenance. It can save you money if something goes wrong after your regular warranty ends.
A service contract is an agreement that provides coverage for certain repairs and maintenance on a vehicle, often beyond the manufacturer's warranty. It can help cover unexpected costs associated with vehicle repairs.
GMC Sierra
"...the price point of a service contract on, you know, an $80,000 Sierra is high."
The GMC Sierra is a big truck that people use for work and everyday driving. It's known for being tough and having a nice inside, which makes it popular among truck buyers.
The GMC Sierra is a full-size pickup truck known for its strong towing capabilities and comfortable interior. It is often used for both work and personal purposes, making it a versatile choice for many drivers.
lenders
"...a lot of the lenders weren't able to hold that, you know, price say it was $6,000 for a service contract."
Lenders are companies or people that give you money to buy things, like cars. You pay them back over time, usually with extra money called interest.
Lenders are financial institutions or individuals that provide loans to borrowers, often for purchasing vehicles. They assess the borrower's creditworthiness and determine the terms of the loan, including interest rates and repayment schedules.
84 month loan
"...that I think during COVID, so many people signed up for that 84 month loan, you know, with a $10,000 markup and right now we're feeling that..."
An 84 month loan means you pay off the car over seven years. It can make your monthly payments smaller, but you might end up paying more in interest and owe more than the car is worth if it loses value quickly.
An 84 month loan is a type of auto loan that spans over seven years. While it may lower monthly payments, it can lead to higher overall interest costs and negative equity if the car depreciates faster than the loan balance decreases.
negative equity
"...the majority of the consumers coming in have extremely high negative equity points and trying to get them out of that is hard..."
Negative equity means you owe more money on your car loan than what the car is worth. If you wanted to sell it, you would still have to pay off the loan even if you sell the car for less.
Negative equity occurs when the amount owed on a loan exceeds the current value of the asset, in this case, a vehicle. This situation can complicate selling or trading in the car, as the owner still owes money even if the car's value has dropped.
Request an Explanation
Heard something you'd like explained? We'll add it to this episode.
Sign in to request explanations for terms you heard.
Want to learn more?
Browse our glossary for plain-English explanations of automotive terms, jargon, and concepts.
Help improve this episode
See something that's not quite right? Our annotations are AI-generated and can sometimes miss the mark. Click the flag icon on any annotation to suggest a correction.