Over the years I’ve been asked on numerous occasions , why are you in the car business , particularly for someone that is more into the way the business runs rather than the product itself .
The answer for me was as simple as looking out a window , when you look out most windows you see 3 things , buildings , people and cars . So if you are in a business involving one of those 3 things , it will last .
Steve’s article wraps some numbers around what we have been saying for a long time , dealers are a critical component of getting people in , out and remaining in cars . After 100 years it’s the most efficient / easy system of keeping people in transport and transitioning out of it when the time is right .
The problem in the process has always been the cars you see out the window , not the one’s in the showroom.
The problem is “ ownership “ , whilst everyone believes cars should be “ owned “ by customers then dealers have to exist .
Moving a depreciating asset from the ownership of the OEM , to the dealer , to the customer , back to the dealer and then onto the next customer and repeat , making sure everyone has clear title , fit for purpose functionality , asset funding and values that support the funding takes some kind of wizardry .
That wizard for 100 years has been the dealer .
If it was just a matter of getting new versions to customers and withdrawing old ones without all the title / funding issues , then “ usership “ would be in full swing and the OEMs or their lenders would carry the “ ownership “ from sheet metal to scrapping .
Problem is cars are the ultimate moveable asset and balance sheets full of depreciating assets with wheels living in peoples garages ( we hope ) for 15 years with an income stream secured by that same moveable depreciating asset are problematic.
Then do this globally .
As the wizards of transition , transaction and value creation , dealers keep this same asset moving easily and efficiently between the various balance sheets of its various owners .
Agency works on blackboards , but the creators were looking out the wrong window , into the new car showroom , not the street . To work it needs to create the same wizardry a dealer creates .
Dealers create deals , because they need to create transition between owners to make money .
Each deal has a combination of the new car margin , trade in gross , aftermarket margin , F&I commission and future service and parts gross for PMA based customers added into the equation to get the current owner what they want to transition to the next owner . Access and ability to see all the margins , geographies and sprinkle the fairy dust when and where required is what makes a deal happen .
Steve highlights how lineal thinking will cripple transactions in a competitive market . First step is understanding the wizardry involved .
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2moAt least that shop has great management cause not all stores are great