Profit Potential for GM Dealers

It’s old news that the profits in franchised dealership settings has slowly been dwindling over the years. We owe most of this to the information and resources that are at our customer’s fingertips. Competition between dealers has driven down the front end gross profits for quite some time now, which has led dealers to largely focus on back end profits through financial services, but even those profits are slowly disappearing.

Not only will the internet tell you what you should pay for a vehicle, but it will also tell you what kind of interest rate you qualify for and what others pay for various insurance products. Over the next five years I also believe you will see a huge decline in finance reserve income and many of the large financial institutions will go to “flats” and interest rate markups will soon be a thing of the past. Although profit margins have decreased over the years, the average price of a new vehicle surely has not. This has many consumers focused on their monthly payment. Just because a customer is not willing to pay more for your vehicle, does not mean they don’t have more money to spend.

Many GM dealerships and large dealer groups are turning to accessories to fill this profit gap. There are many benefits for a dealership to have a focus on accessories. Most of which are driven from the idea of creating gross profits for not only variable operations, but fixed ops as well. Many GM dealership employees have realized that accessories are quite easy to sell because of the tangibility aspect of it. Customers are paying for something they believe they need or want to protect and customize their new vehicle.

             The benefits of GM accessories do not only exist for the dealership, but also the customer. By offering customers accessories at the time of delivery they are able to include the price of the accessory in their monthly lease of finance payment. This will make it more affordable for them. Accessories will also help retain your customer from going elsewhere to get aftermarket accessories which could lead to other possible services. GM dealerships stress a lot on the importance of customer retention when it comes to sales and service, so why should accessories be any different? Lastly, GM accessories can also be included in the manufacture warranty to ensure that these products are covered for your customer at any GM dealership.

             Process oriented dealers know that a great service advisor does a multi point inspection on every vehicle that comes in for service. A great finance manager presents all available products to all of their customers. Both of these techniques have been proven to drastically influence sales. Same with accessories. If you train your staff to just bring up functional accessories to their customers, you will see results. Functional accessories include: side steps, floor mats, tonneau covers, etc.  If a dealership correctly executes an accessory process, there is no doubt that it can become one of the most profitable “departments” in a dealership. Remember, your customers have more money to spend. They just haven’t been asked for it yet.

Ryan Caldwell

Territory Sales Manager        

1. Accessories of Michigan

[email protected]