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Drive to Success: Margin Compression Solutions

by Dealertrack
on February 19, 2018

Drive to Success is a weekly series capturing the most influential articles, tips, and tricks from industry experts and publication to help drive your dealership to success. Each week will focus on a specific key topic in the automotive industry.

Margin compression is something that holds dealerships back from growing their business. Every department in the dealership can make an impact in the fight against margin compression. Most importantly, dealers should listen to customers to avoid major declines in revenue.


1- 3 Must-Dos to Combat Dealer Margin Declines

Digital Dealer: NADA reports that gross profit as a percentage of new vehicle selling prices dropped below 6 percent, to 5.9 percent, in the first half of 2017 compared to the same period in 2016. In used vehicles, the gross as a percentage of the sales price dropped to 12 percent. Your dealership can fight back against these decreases with human capital, inventory, and technology.

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2- A Formula for Dealership Success Despite Shrinking Margins

WardsAuto: Look for gaps in your business based on closed/lost opportunities to see where your process needs improvement. Whether you have to reset expectations with your team, change the task structure or even upgrade technology, these are all actions you can take sooner rather than later. They are also actions that may lead to a boost in your profits.

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3- Looking to Boost Profit Margins? Might Be Time to Consider Your Own Branded F&I Products.

Digital Dealer: Only about 30 percent of a dealership’s revenue comes from new vehicle sales. The remaining 70 percent is found in activity from used sales, service and repair and F&I products. And even that breakdown can be further boosted depending on which type of program and products are administered for areas such as F&I.

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4- F&I and Social Media – 4 Ways to Boost Profits & Increase CSI

CBT Automotive Network: Overall, it’s estimated that 25% of car shoppers have used social media in some way while looking for a car. Do not miss out on such a large opportunity to draw in more customers and ultimately, increased profits.

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5- 7 Ways Dealers can Punch Back Against Margin Compression

Dealer Marketing Magazine: Car dealers are notorious for fighting through tough times. Their best right hook is more car sales, but there’s another way to punch back, which is to take some skin off margin compression by using cost and expense control.

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Check back next week for another Drive to Success: NADA 2018. You will learn about the upcoming NADA convention and 2018 auto industry news.

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