Dealership Floor Plan Management: Three Questions Dealers Should Ask Daily

Dealers use a number of tools each and every dayimage of phone with mynextgear showing dealership floor plan management example to help maintain and grow dealership business and profitability. For NextGear Capital dealers, this can often mean pulling a few useful reports from myNextGear and making business decisions based on those report results. Each day, NextGear Capital dealers should ask the following big questions as they monitor their dealership floor plan account.

What’s the current account status?
The myNextGear dashboard gives dealers a robust overview of key metrics. This overview includes upcoming payment due dates, the number and status of floor planned vehicles and details of the vehicles floored. In addition, easy-to-view information about current credit lines can give dealers a view of how much credit is still available to use.

What is account data saying?
Data from a dealership floor plan can be used to show average turn time, top inventory types and most used inventory sourcing options. How long have some vehicles on the dealership floor plan been sitting on the lot? What is the typical turn time for the dealership? How many times did the dealership purchase inventory from a particular auction? The answers to these questions can help a dealer tweak daily business strategy in order to run a more efficient and profitable dealership.

What actions need to happen?
After looking through dealership floor plan data, dealers can then determine if their account requires any additional action. Does a title need to be requested? Does a payment need to be made? Does staff need to be notified that certain units need to be pushed through dealership inventory exit strategy? Once this additional action is determined, dealers can complete or assign those tasks to other staff as they see fit.

Automotive floor plan management is just one piece of the daily dealership puzzle. However, with the right tools in a dealer’s hands, building an efficient and profitable dealership can be an achievable goal.

Want to Increase Dealership Sales? Retain Walk-In Customers

Increase dealership sales by retaining walk-in customersAccording to a Cox Automotive study, “walking in” remains as a customer’s most common initial point of contact with dealers. More than half of car buyers don’t contact a dealership prior to their first visit. In addition, out of the 400 consumers who visited a dealership and completed a survey, three out of four went to the dealership with the intention to buy but only one ended up making a purchase. What prevented those consumers from making a purchase? What can a dealer do to increase dealership sales by encouraging walk-in customers to return to make a purchase?

Why Didn’t They Purchase?
When customers leave a dealership they typically do so for a number of reasons. Of the 400 consumers surveyed, the top two reasons why they left was because they were considering other brands, and the deal offered wasn’t compelling enough. Though customers ended up leaving for those reasons, 92 percent of those surveyed said they would come back to the dealership in the future.

Create a positive experience
Encouraging a customer to revisit starts as soon as they walk through the door, which means dealers need to focus efforts on creating a positive experience for customers no matter what part of the sales cycle they are in. This can mean doing little things, like making sure the lot is clean, inventory is presentable and that your sales team effectively gauges how hard to push a potential customer. A bad experience can quickly push a customer from being willing to visit, to never wanting to step into a particular dealership ever again.

Figure out how to measure revisiting customers
Without a solid plan to capture walk-in leads, how is a dealer supposed to know whether or not a customer revisits? Note what current CRM capabilities are. In addition, consider what information a potential customer is willing to share. Are they looking for a particular vehicle? Any information walk-in customers are willing to provide can help dealers learn more about their current market, and additionally provide insight for future marketing efforts.

Walk-in customers will often make up a large number of dealership customers. Though many of them may not buy today, working to ensure a positive experience for every customer can mean more customers and an increase dealership sales down the road.

Cars, Consumers & Credit Cycles – Webinar with Tom Webb

Tom Webb discusses the used car market, the economy and automotive trends for 2017Economic and industry factors can have a significant impact on any industry. In a recent webinar, Tom Webb—chief economist for Cox Automotive—discussed industry and economic factors that will likely impact the used car market in 2017.

Economic Conditions
The two dominant economic factors that typically determine the health of the used car market are the labor market and credit conditions. Total employment saw less growth in 2016 than in previous years. However, that was to be expected given that the start of the year had an official five percent unemployment rate. Extremely weak wage gains and low productivity growth labor participation rates remain at 40 year lows. Despite those negatives, conditions remained favorable for the used car market primarily because of stability. Jobless claims are at an all time low, and Webb is hoping 2017 will bring a much needed increase in wages and job growth for car consumers.

Auto Loans
Auto loans from 2011-2016 experienced a 58 percent increase. Though household income and wealth has not increased significantly, low interest rates, a shift in consumer financial obligations and longer loan terms have changed a consumer’s ability to purchase vehicles and pay back their loans.

Used Vehicle Retail Sales
Combined sales of used vehicles increased for franchised and independent dealers for the seventh consecutive year. At this point in the cycle, used vehicle sales have shown faster gains than new vehicle sales. Independent dealers normally gain back a little share from franchised dealers around this time because wholesale supplies open up.

Better mix of vehicles coming to auction
Because wholesale supplies open up, like the sale of rental fleets and the increase in off-lease vehicles, will mean a better variety of vehicles will be coming soon to auctions and other inventory sources. The diversity of vehicles available in terms of make, manufacture, color and model mean that dealers will have more choices and chances to find the vehicles their customers want.

If you are interested in learning more about current economic conditions and trends in the automotive industry, watch Tom Webb’s Webinar below.

Requesting Vehicle Titles With NextGear Capital

Vehicle titles are part of everyday life at a dealership.stack of vehicle titles
For dealers that floor plan, it’s not unusual for vehicle titles to be held off-site. Automotive floor plan companies hold on to titles for asset security, but will often allow the title to be instantly viewable through a company web or mobile app. However, there are instances when a virtual preview doesn’t cut it. A dealer may often need to check a title out so they can complete necessary state work or because they’ve just sold a vehicle. What should a dealer do when they need a title, but the title is in their floor plan company’s possession?

At NextGear Capital there are two different ways dealers can request their vehicle titles; through either the Title Request Program—often referred to as the TRP—or by making a title request via phone or email.

What is the TRP? When should a dealer use it?
The TRP is typically intended for a dealer who has a client coming in to purchase a car, and is planning to pay the car off on their floorplan. When a title is requested on the TRP, a dealer then has seven days to pay the car off, or a payment is automatically pulled. Please note that the TRP is currently only available online via myNextGear.

For dealers who have buyers lined up, or who are planning a sale and expecting to sell and pay off units, the TRP can make it easy to give customers their title the same day as their vehicle purchase. Which in turn, can increase customer satisfaction and chance that they will return for maintenance or for their next car purchase!

When should a dealer call or email NextGear Capital to make a title request?
Dealers should call or email NextGear Capital to make a title request if they need a title for longer than seven days. Typically, this method is best if a dealer needs to complete state work or if they need a title for an inspection.

Average wait time to connect with a NextGear Capital team member on the phone is 10 seconds, and if requested by 5 p.m. those titles will typically arrive by the next day. Dealers can then submit those titles for state work or have them on hand for a pending inspection. Please note that until the vehicle is paid off, NextGear Capital will continue to follow up on the title.

Remember:
As a general rule, if a title is needed for more than 7 days, contact NextGear Capital by 5 p.m. and the title will typically be sent to the dealership the next day. If a dealer is anticipating selling a certain vehicle and is looking to pay the unit off, use the TRP.

Requesting vehicle titles through either of these two methods ensures that NextGear Capital dealers have a simple and efficient way to request and manage their titles.

 

Benefits of Floorplan Companies Holding Titles

stack of titles floorplan companies holdWhen dealers begin utilizing a floor plan to finance their purchases, initial concerns surrounding immediate access to vehicle titles may arise. Floorplan companies hold on to titles for the same reason salespeople will ride along with customers during a test drive: asset security. A consumer isn’t supposed to drive a vehicle off the lot without paying for it in the same way a dealer can’t have full possession of a title until the floored vehicle is paid off.

With this in mind, there are a few key reasons why having a floor plan company handle titles can be extremely beneficial for a dealership.

Reduces overhead for dealers
Dealerships need to have a system in place to effectively handle and process titles. Handling titles is part of daily life for all dealers, and ensuring they are managed effectively is paramount to keeping the car buying process seamless for consumers. However, by allowing a floor plan company to hold titles, the potential for overhead reduction presents itself due to not requiring as many on-site title clerks.

Reduces risk for dealer
In addition to creating an opportunity for reduced overhead, allowing a floor plan company to hold titles could reduce risk for dealers as well. A vehicle cannot be sold without a title, so it’s imperative titles are kept in a safe, secure location to ensure they are never lost or stolen.

Most floorplan companies have extreme measures in place to ensure titles are kept safe and secure. At NextGear Capital, all titles are held in a secure, fire-resistant vault with cameras running 24/7. Additionally, NextGear Capital implemented an innovative solution that tracks the location of each and every title in their possession.

Still not comfortable with the idea of floorplan companies holding your titles?
Dealers working with NextGear Capital have an average call wait time of only 10 seconds before they’re connected with a customer service representative. The responsiveness doesn’t stop there! If a title is requested by 5 p.m., the requested title will arrive to the dealership by the next business day.

Though titles for floor planned vehicles might not be immediately available to dealers, they’re available for viewing through the myNextGear platform at any time. With titles arriving next day at the dealership—often from states away—having a floor plan company manage your titles just might be the best option for your dealership!

Best Practices of Managing Dealership Reviews

Encouraging a car buyer to shop at a particular dealership reviews management best practicesdealership is no longer just a matter of simply being the closest dealership locally. For today’s customer, the car buying experience begins online. According to a study from Autotrader and Kelley Blue Book, car buyers spent 60 percent of their time online in the vehicle purchasing process. The time to influence where a customer shops begins with a dealership’s digital presence, and when a customer is deciding on a dealership to visit they are bound to run across a number of dealership reviews.

Feedback should always be appreciated, and review sites make earning dealership feedback easier than ever. In an industry where the digital experience can make or break a potential customer’s decision to purchase at a location, it’s important to monitor and respond to dealership reviews. Take the below best practices into consideration to ensure your dealership’s reviews encourage, and don’t discourage, potential customers from visiting your lot.

Monitor reviews
Take note of the review sites where your dealership has earned reviews. What are customers saying about the dealership? Are there any issues mentioned in the dealership reviews that can be addressed? Every dealer and dealership will have to decide how frequently they monitor and respond to reviews. Find a cadence that works best for the team member in charge of monitoring and responding to reviews.

Comment on reviews, both good and bad
Every customer leaves a dealership either satisfied or dissatisfied with their experience. For the customers that leave positive dealership reviews, make sure to thank them for their feedback. They took the time to share their positive purchasing experience with the rest of the digital world. While it might be tempting to just ignore negative dealership reviews or tell the reviewer why their opinion is misguided, it will better serve the dealership if the response asks to reconcile the negative experience with the reviewer.

Encourage feedback
Feedback can give dealers an idea of what they need to do to improve service for their customers. Be willing to ask customers if they would like to contribute a dealership review after their purchase. Their feedback can lead to valuable insights on ways to improve the dealership experience. Dealerships that ask for and implement feedback are more likely to be in tune with the wants and needs of their customers.

Though dealership reviews have the potential to influence a potential customer’s visit,  when managed correctly, those reviews can bring out the best qualities of a dealership, provide insight on dealership processes that could be improved and encourage customers to visit and purchase.

Need to Exchange Aged Inventory? Build a Local Dealer Network

aged inventory build a local network Aged inventory is a big issue for many auto dealers. Vehicles are depreciating assets, and if they remain on a dealer’s lot too long, they can tie up additional cash flow. Having an exit strategy for each vehicle that enters a dealership is essential. Typical places to dispose of stale inventory include auctions, Autotrader, OVE, SmartAuction, Craigslist, and Ebay, amongst other places. However, what can a dealer do if all of those options have been exhausted and their aged inventory hasn’t sold yet?

Consider taking inventory to the dealership down the road, or to the dealership the next town over. Building relationships with other dealerships in the area can be a valuable asset to any dealer looking to dispose of stale inventory. The old inventory of one dealer can be brand new inventory to another dealer.

So what can a dealer do to help build their local dealership network to dispose of aged inventory?

Get to know the neighbors
Building a network often means taking on the responsibility to be the first to reach out. Take the time to get to know other dealers in the area. They may be competitors, but they are also neighbors and peers in the industry and endure similar struggles.

Learn about their inventory preferences
Beyond just working to build a relationship, learn about the type of inventory they prefer to sell. What type of inventory do they have? What aged inventory might sell better at their dealership? Are there any inventory styles between dealerships that overlap? The aged inventory at one dealership could be a quick sell at another dealership.

Be willing to purchase aged inventory from other dealers
If other dealers in the area are willing to purchase aged inventory, be sure to return the favor. A willingness to purchase inventory from other dealers can encourage others to purchase inventory in return. Participation from all parties can make a local dealer network successful.

While it is not ideal to sell aged inventory to another dealer, leveraging a local network can allow a dealer to dispose of aged inventory, and become an inventory source for other dealers. Don’t forget, it’s an avenue to help manage cash flow, and ultimately overall profitability.

Automotive Floor Plan Management Best Practices

Once a dealer is cleared to use an automotive floor plan, automotive floor plan management tipsthey instantly have access to more capital to aid in purchasing inventory. However, along with that instant access to more capital is a new set of management responsibilities. Keeping these best practices in mind will help dealers integrate their new capital into their current business plans, allowing them to use their floor plan more effectively.

Fit the floor plan to the dealership
Dealers need to be aware of their own business numbers in order to optimally manage an automotive floor plan. What is the dealership’s average inventory turn time? How many cars need to be sold in order to meet operating expenses? What is the average profit margin per car? Knowing the answers to questions like these can give dealers key insights that help establish where they were, where they are going and how long it will take for a dealer to reach their goals. The answers to those questions can also provide clarity on how an automotive floor plan can fit into the current shape of the business.

Use floor plans for discipline
When a dealer uses cash or a regular business loan, there is no incentive to sell a car or profit quickly. Additionally, a dealer’s initial investment will depreciate depending on how long the vehicle stays on their lot. Floor planning can help provide a dealership with discipline. Dealers have a given amount of time available until they have to pay a vehicle off. Use that deadline to the dealership’s favor.

If a dealer hasn’t received a profitable offer on the vehicle due for payoff, that approaching deadline can jump-start their inventory exit strategy process. Whether that exit strategy includes selling the car at auction, working with other local dealers or holding out for a more profitable offer, the floor plan deadline ensures that a dealer doesn’t just let their inventory, and their initial investment, depreciate.

Always floor plan responsibly
A dealer’s business data combined with a floor plan can lead to excellent dealership profits. However, dealers need to make sure that they floor plan responsibly. If a dealer uses their entire line of credit and those vehicles haven’t sold once payoff time arrives, that dealer is going to have a pretty hefty bill. Space out inventory purchases. That way, payoff dates are spaced appropriately for dealership cash flow, just in case inventory hasn’t sold before payoff time.

Used together, these best practices allow dealers to purchase the inventory needed, provide incentive to profit and allow for manageable floor plan payments.

Auto Floor Plans vs Cash: What Cash Buyers Lose When Buying Inventory

Every dealer has a preference on what type of auto floor plans vs cashcapital they use to purchase inventory. Each dealer has the choice to use either the cash they have on hand, to use auto floor plans, or use the loans they’ve secured from banks and other financial institutions. Each form of capital comes with its own risks and rewards. However, dealers that primarily use cash could be missing out on some of the benefits an auto floor plan can provide.

The Cash Conundrum
Let’s say someone asks a dealer to invest $10,000, and also makes the personal guarantee that the money invested today will be worth $50 less the second the money is deposited. Of course,
a discerning dealer would think twice about making that investment. However, what some dealers don’t realize is taking that deal is exactly what happens when they pay cash for their inventory.

From the beginning of the inventory / retail stocking process, dealers are utilizing capital. At auction, the reason a dealer will win a bid is simply because they were willing to pay more than anyone else. This is of course, a calculated risk. Often, the dealer’s sale of their auction purchase will result in a profit. However, there is always the possibility that the purchased car won’t sell.

Any car purchased will eventually depreciate in value. The longer a car sits on a lot, the more that car will depreciate. Purchasing a vehicle with cash means that the money initially spent on the car will also depreciate, and the vehicle will eventually be valued at less than the dealer’s initial investment. In addition, purchasing inventory with cash will limit a dealer’s options to keep their money working for the business.

If a car sits on a dealer’s lot beyond 60 days, the dealer will likely be pretty motivated to sell that particular vehicle. However, at this point, the dealer’s cash is now tied up in the vehicle. Purchasing another vehicle isn’t a possibility. In addition, the dealer isn’t likely to earn back their initial investment if they try to re-sell the vehicle at auction. When the dealer first won the unit at auction, they were already willing to pay more than anyone else.

The time the vehicle spent on the lot didn’t increase the vehicle’s value either, so the dealer is already facing a loss. It also doesn’t help that the dealer doesn’t have time to wait for a buyer. In order to purchase another car that is a better position to sell, a dealer needs cash and they needed it yesterday.

But doesn’t the same thing happen when using auto floor plans?
Technically, that same vehicle will still depreciate whether or not a dealer uses cash or a floor plan. However, when a dealer uses a floor plan they have more options available than if they paid cash. With a floor plan, a dealer can pay a small amount of the car off at a time, they can extend a vehicle, or they can buy down their depreciation over a period of time. With a floor plan, a dealer has extra capital on hand to ensure their ability to purchase more inventory.

At NextGear Capital we recommend a dealer’s budget for stocking inventory to be a 70/30 mix of their floor plan and cash, respectively. Using a floor plan to stock inventory ensures a dealer can buy enough vehicles to meet the needs of their market, and the cash on hand ensures a dealer can pay for their expenses.

Buying inventory with cash can limit the actions a dealer can take to help their dealership profit and succeed. However, auto floor plans give a dealership the capital and flexibility needed to purchase the desired inventory for their market.

Basic Factors That Can Make or Break Used Car Dealership Success

Drawing customers to your used car dealership used car dealership successand keeping them engaged relies on a number of factors. How effective were your marketing efforts? What inventory do you have in stock? Is the vehicle priced appropriately for the buyer? Beyond these few questions, there are often overlooked factors that go beyond your dealership’s vehicle purchasing experience that may be preventing you from leaving a positive impression on customers and hurting your chances at growing your customer base.

Keep your inventory aligned with the wants and needs of the market
Stocking the inventory your market wants is a somewhat-invisible, but important component of used car dealership success. Staying in tune with what your customers are purchasing allows a dealer to pivot inventory quickly and seamlessly, and ensure that your lot is stocked with the vehicles your customers are looking to buy. If you don’t have the right vehicles to capture your customer’s interest, they are likely to move on to another used car dealership. The different wants and needs of your market will dictate the way your dealership spends its time and resources on inventory.

Minimize hand-offs to multiple staff members
Potential buyers don’t like to repeat themselves to multiple staff members. In addition, it can be frustrating or confusing for a potential buyer to get passed around from department to department. Take note of your current sales process. How many times is a customer passed from one department to another? Can you reduce that number? A customer most likely won’t notice if they stick with one or two different staff members. However, if they get shuffled around to more it is possible that they’ll get frustrated with the sales process and possibly leave.

Keep your dealership presentable
Ensuring that your dealership is clean and presentable can change a customer’s entire perception of your dealership. While it is perhaps a small and basic part of running a dealership, it can set the tone and leave a lasting impression on customers. A customer won’t notice a clean office or clean inventory, but they will notice an unkempt office and muddy vehicles. Clean cars with fresh interiors will always leave a good impression. In addition, visible pricing and a well lit lot ensures that customers can easily navigate your dealership and their potential vehicle options within their price range.

These overlooked, yet noticeable, components of a dealership can make or break a customer’s perception of your lot, and could potentially be the difference between a one-time customer or a repeat customer.