Warranty Parts Increase
The Lift Received is Based on How Well the Dealership Holds the Customer Pay Gross Profit. How Can You Increase Parts Gross?
If two dealerships are in the same state and are both with the same OEM, there may be a difference in the mark-up percentage allowed or gross retained by each store. It is for this reason that one vendor will state they can get you hundreds of thousands of dollars and another does not. No one can make a quote of how much they can increase the return until your actual repair orders are analyzed and maximized. At SDS we will do all we can to get you the most with what we are given to work with. If the return is too low, moving forward, we will implement processes – which are basic good business practices. These should already be in place and many managers appreciate the helpful reminders that will improve your customer pay gross profit margins (at no cost to you).
Why the variations? Here are the differences:
1. MATRIX OR MSRP PRICING? – matrix or flex pricing is a parts mark-up process where the parts department determines what they will sell a part at. Matrix pricing is a set up in the dealership’s DMS, that DOES NOT use the manufacturer supplied tapes for retail pricing and the only way the part is discounted is if a parts counter person overrides the system or an advisor discounts the repair. It is recommended that all dealerships use matrix pricing. Matrix pricing will turn anywhere from a 10% to a 30% higher mark-up average percentage over using factory supplied price tapes, increasing both customer pay and warranty parts gross profit. Most importantly, you control the margin and not the manufacturer.
With matrix pricing the dealership and not the manufacturer will set the price for their market area. The dealership establishes the retail sale and not the OEM. We all have seen where the automaker has reduced the new car margins. They also have this same practice with part margins and before you know it the same volume of parts are being sold but without any gross.
2. DEALERSHIP SELLING AND DOCUMENTATION PRACTICES – If the dealership is discounting many repair orders it will lower the average mark-up percentage. This discounting generally does not apply to maintenance items unless the advisor adjusts the claim for a $10.00 LOF special (as an example) and does not say it is for the LOF or tire rotation, etc. In this case the discount is applied to the parts and/or labor, lowering the rate.
How do we get started?
At no cost to the dealership contact one of the SDS consultants. We will determine how much of an opportunity there is and all information provided is kept confidential and destroyed once the package is approved. Please have these figures handy because the next natural question is, “How much do you charge?” Our pricing is a one-time fee based on estimated lift. This way we can help smaller stores while not taking advantage of the larger service departments.
To determine the warranty parts increase potential please have the following handy. Using the most recent year-end financial statement or the last 6 months (minimum) of data – (please be brand specific, if possible, on multiple dealer lines) please provide:
- Warranty Part Sales in Dollars
- Warranty Parts Gross in Dollars
- Matrix or Manufacture tapes?
Once we receive this information we can provide both a low and high end estimated lift along with pricing.