Gary Biskup 2018 Predictions

Gary Biskup Diversifying Revenue Streams in the Independent Automotive Space

Gary Biskup, Vice President
Gary Biskup, Vice President, EFG Companies

Q. How will independent dealers address the challenges of another year of flat unit sales?

A. 2018 is looking to be another year of flat unit sales. Because of this, independent dealers are operating on razor-thin front-end margins, and are looking for solutions to increase their back-end profit. We’re already seeing dealers become much more selective when it comes to inventory management to make sure that all the vehicles they sell can be covered by the F&I products they sell. More independent dealers are going to auction looking for off-lease vehicles, with either a little bit of manufacturer warranty left, or just outside of manufacturer warranty coverage. These vehicles offer the most opportunity to sell F&I products on the back-end.

Q. What will be the top priority for independent dealers in 2018?

A. To maximize foot traffic and profit per vehicle sold, F&I will be the priority for 2018. More independent dealers will retool their product menu to ensure they have the right products for their inventory and their consumer market. They will refocus any advertising and marketing dollars to feature their customer service levels and market-differentiating consumer protection products. We’ll also see dealers begin to strategically use F&I product sales to foster repeat business. Teams will be trained on how to effectively position the benefits and terms of F&I products, with the message that once the coverage ends, bring the vehicle back to the dealership and trade it in for their next vehicle. This will help create a three to four-year sales cycle for repeat business.

Q. How are independent dealers working to appeal to Millennial consumers?

A. As Millennial purchasing power continues to increase, dealers are evaluating how to best appeal to this consumer group. We’re already seeing dealers invest more in reaching consumers where they are, using their websites and mobile apps to engage with consumers before, during and after the vehicle purchase. In addition, we’re seeing a growing interest in moving to a virtual F&I model. This helps dealerships appeal to a demographic that prefers to interact online, while also helping dealerships better address staffing challenges.

Q. How are independent dealers diversifying their revenue streams?

A. While independent dealerships traditionally focus on just the up-front profit from the sale of a vehicle, we’re seeing a growing interest in diversifying dealership revenue streams. More independent dealers are realizing that they are leaving a significant amount of money on the table by not having a service bay. In 2018, we’ll see more dealers invest in infrastructure improvements, or partnerships with local service centers to foster longer-term consumer relationships and create repeat business.

Q. More lenders are expected to pull out of the subprime space in 2018. How will this affect independent dealers?

A. One of the biggest challenges that faced independent dealers in 2017 was the pullout of the subprime market by more lenders. Going into 2018, we see this trend continue. To help keep as many good lenders operating in the independent space, we will see more dealers pay closer attention to their compliance practices. We’re advising our independent clients to audit the last two years of their financials, checking for compliance with both regulations and lender requirements. Going forward, all independent deals will need to be held to the same level of scrutiny as their retail counterparts, making sure all stipulations are accounted for, and that the vehicles are titled and white-slipped correctly. In addition, independent dealers will need to show good standing with their local Chambers of Commerce and Better Business Bureaus to attract more good lenders.

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