Dealer / Automotive Terms

What are a few some search terms that are used when customers are in the lower-funnel shopping bucket?

"Dealer", "Lease" and "Sale" are some of the more commonly used words shoppers use when they are in that lower-funnel shopping bucket.

What are the micro-moments of buying a car?

1. Which car is best? 2. Is this car right for me? 3. Can I afford it? 4. Where should I buy it? 5. Am I getting a deal?

What is the Dealer Vault?

Dealer Vault is a secure access point for 3rd parties to pull data from your DMS to use for database management etc.

What does investing in your BDC do for you?

Investing in BDC & Sales training can increase conversions and closing rates.

What is PVR?

Per Vehicle Retailed Used in 2 ways: 1. Average advertising cost per car sold 2. Average profit made per car sold

Negative Equity

The amount of money that you owe on your vehicle minus the value of the vehicle. If you owe $10,000 but your vehicle is worth $7000, you have $3000 negative equity.

Front-End Gross Profits

The amount of profit made on the vehicle itself.

Actual Cash Value (ACV)

The cash value of the vehicle and it's condition when the consumer brings it in for trade. The ACV is assigned during the appraisal of the vehicle.

Pack

The dealership will allocate a certain amount of the profit to itself before determining the commission. Let's say there's a $2000 profit on the car— after a $500 pack, the salesperson will be paid $1500.

Front End/Variable Operations

The new and used vehicle sales, finance and insurance, and leasing and rental departments all are part of the "front end" of the dealership. As the name implies, these departments usually are found at the front side of the dealership. The money brought in by these departments can be very inconsistent, or variable, since sales of cars can be impacted by multiple factors outside of the dealership's control.

Back End/Fixed Operations

The parts and service departments typically are at the "back end" of the dealership building. Ideally, the revenue from these departments covers all of a dealership's operating expenses, and the money they earn is more consistent, or fixed, over the course of a year.

Repair Order (R.O.)

The service advisor at the dealership creates this document when a car is brought in for service. When writing the R.O., the advisor records the customer's complaint and gains authorization from the customer to work on the vehicle. Also known as a work order.

Stair-step Incentive Program

They are incentives given to dealers that are tied to sales quotas. As sales increase for the dealer then the incentive amounts also increase. Many times, these incentives are used during "end-of-the-month" sale events that encourage dealers to empty their current fleet of cars. These practices have been used by manufacturers to increase revenue at affiliated dealers. Practice of "stair-step incentives" in which the manufacturer pays the dealership for the total number of cars sold in a given period and typically this builds throughout the year. So while the dealership may earn a single sum for the number of cars sold in a given month, that sum may jump up for a larger number sold that quarter and an even larger number sold for the year.

First pencil

This is the opening offer from the sales manager, usually written onto the four-square worksheet, so-called because it is highly negotiable, i.e. written in pencil, not ink.

F&I

This stands for the Finance and Insurance office where the documents are signed. The F&I salesperson usually will push products such as extended warranties, fabric protection and alarms.

What is included in a Four Square?

Trade In, Down payment, Cost of the car, Monthly Payment Four-square: As negotiations begin, the salesman pulls out a worksheet divided into four squares which represent the four elements of a car deal: selling price, trade-in value, monthly payment and down payment.

Flipped

When the balance on your trade exceeds the actual value of the vehicle

Upside Down

When the value of the car is less than the amount of money owed on the car.

What is an example of a long-tale keyword?

year/make/model 2019 Ford F-150

Average Dealership Employee Turnover Rate for Sales Department

70%

Up

A customer who walks onto the car lot. The term probably comes from the order in which customers are taken, as in: "Who's up next?"

Dealer holdback

A dealer holdback is an amount that auto manufacturers provide to auto dealers for each new vehicle that is sold. The holdback is usually a percentage of the invoice price or the manufacturer's suggested retail price, or MSRP. A typical holdback is 2 percent to 3 percent of the MSRP. With a dealer holdback, a customer can buy a car for less than the invoice price and the dealer can still make a profit. Whether the manufacturer computes the holdback using the invoice price or the MSRP depends on the car. This allowance reduces sales commissions and supplements the dealer's cash flow by artificially raising the dealership's costs on paper. The dealer holdback varies depending on how long the dealer retains the car, and it helps dealers to advertise cars at invoice-price sales. The holdback reduces to zero after a given period, usually 90 days, so dealer holdback is at its maximum when a car is first delivered to a dealer. The dealer will not receive the holdback if the vehicle is bought after the holdback window expires.

Margin Compression

Defined: Margin Compression is simply where input costs rise faster than the prices received from sales of the products sold leading to decreasing margins over time. Gross profit maximization is 21 days. The clock starts ticking as soon as a dealership receives the vehicle. When auto sales slid during the recession, retailers turned to the F&I office as a profit center. In the past decade, F&I profits have steadily increased -- and continue to be a powerful weapon for dealers against margin compression.

Desking a Deal

During a car sale, this is the process of presenting options to a customer in order to come to an agreement on the selling price, monthly payment, and financing terms for the car purchase.

Service Absorption Rate

Is the percentage that the Parts, Service and Body Shop operating gross covers of the total of its own entire combined department operating expenses PLUS the total of fixed expenses and dealer salary. If a dealership's fixed operations generate enough net income each month to cover all of its costs — a 100 percent rate — then all the other pieces of the profitability puzzle go right to the bottom line. "With a high absorption, you can be very resilient in the market. Even though there may be a downward trend in the retail vehicle sales, or even a compressed market, you can be so resilient ... in being able to operate in that market," Jacobson explained. "It's truly the financial security for the dealership and its employees."

Back-Office

While sales and F&I are the more obvious profitability engines for dealerships, many people are overlooking another area of the business that can help mitigate the effects of margin compression and improve customer retention: the back office. The back office puts dealers in the driver's seat, letting them to increase process efficiency and transparency to boost profitability rather than relying only on more sales. Improvements can start in areas like the registration and titling process, beginning with speeding the time it takes to receive titles for trade-in vehicles, which in turn, reduces holding costs and allows the dealership to move cars off the lot faster. The biggest bonus? It can improve customer-satisfaction scores as well. This is a hidden but powerful profitability mechanism. But it involves overhauling traditional, inefficient processes and technologies. https://www.wardsauto.com/dealers/car-dealerships-can-speed-vehicle-titling-and-registering Inventory holding costs average $32 a day