Though sales rep turnover continues to be an issue for automotive dealerships, weekly earnings continue to rise above most other private sector businesses as the dealership workforce continues to expand.
NADA’s third annual industry report on the dealership workforce showed dealerships were adding new employees, paying above-average wages and showed weekly earnings growth last year.
The 2014 Dealership Workforce Study Industry Report, produced in partnership with ESI Trends and based on 2013 data, showed total dealership employment grew 3.4 percent and topped 1 million people.
But men continue to dominate this workforce, and the gender gap remained unchanged.
Of active payroll employees, 17.7 percent were women, consistent with the previous year’s data, NADA reported.
However, the dealership workforce is seeing more of one demographic: Generation Y employees. Of new hires last year, 47 percent were Gen Y, who now make up 27 percent of the dealership workforce. This is up 4 percent from 2012 rates.
The jump in Gen Y employees perhaps can be contributed in part to the improving work/life balance in dealerships.
The percentage of dealerships that schedule employees to work more than 45 hours per week has dropped significantly over the past three years. Now, only 13 percent of dealerships surveyed schedule sales consultants to work more than 50 hours, and 16 percent schedule service advisers for those hours.
Weekly earnings results showed more positive movement, as well, as weekly median earnings came in at $976 in 2013. This is up 25 percent from the median weekly earnings of $782 in the U.S. private sector workforce.
That said, median weekly earnings growth for dealerships, in particular, slowed down last year, growing by only 1.3 percent, slower than the 3.7 percent rate in 2012.
Last year, turnover remained a problem for dealerships, with rates moving up slightly from 35 to 36 percent. Rates still remain below the national average of 42 percent for private sector employees.
“The Report shows a growth industry with strong earning opportunity in a changing work environment,” said Ted Kraybill, ESI Trends president and founder and designer of the study. “And although the industry is often characterized as a ‘high-turnover’ work environment, actual turnover at new-car dealerships is significantly less than the private sector average.”
Sales consultants continue to see the highest turnover rates at dealerships, with 66 percent turnover, marking a year-over-year increase of 4 percent.
“Only at the sales consultant position does turnover exceed the national average, but many dealerships are taking important steps to address that challenge, such as reorganizing their staffing models to reduce total hours and focusing on team-based incentives,” Kraybill said.
New-car sales have picked up nicely, lease returns are aplenty and franchised dealers are trading for more cars — all of which means more used supply entering the market and eventually giving independent dealers like Steve Matthews a boost in inventory.
But for a while, that wasn’t the case, as many independents struggled to find inventory.
“And now with the lease returns coming in and new-car dealers trading for more cars, you’re starting to see an influx of more used cars in the marketplace,” said Matthews, owner of Matthews Motors in Clayton, N.C.
Auto Remarketing and BHPH Report talked with a few independent dealers during a break at a NIADA Dealer 20 Group session in Raleigh, N.C. this week to get a sense of the market for independent dealers as we head into 2015.
One of the dynamics for many independent dealers will be, as Matthews mentioned, more supply available.
Lease return figures are likely to be in the neighborhood of 2.5 million units in 2015, according to Manheim Consulting data cited in a November AutoTrader.com/Manheim certified pre-owned study.
And with some new-car dealers not able to take all their lease returns back, many will flow back into the independent dealer market, said Eric Freeman, co-owner of Freeman Motor Co. in Portland.
Granted, supply may still be tight among some dealers. Over at Wilmington Auto Center, dealer principal David Adkins said he has done more online buying than ever before and tried to secure pre-sale units before they hit the lanes, for example.
Turning to the finance side, one favorable sign Matthews has spotted has been more lenders starting opening their wallets further.
“There’s a lot of cash out there that is available, so going into 2015, I see a lot of opportunity in the independent car market,” said Matthews, whose store is located in the greater Raleigh area and focuses mainly on affordable cars 5 years old and newer with 75,000 miles or less
As for 2014, Matthews Motors has thrived through a combination of repeat-and-referral business coupled with pent-up demand from buyers waiting for the economy to improve a bit — “which it has,” he said.
“Aligned with pent-up demand and the fact that banks are being a little more lenient, it’s really opened up a good market out there,” Matthews said.
One challenge on the finance side noticed by Marshall Zoerner — the general manager of Freeman Motor Co. — is that many credit unions are becoming the “go-to place” for financing and with many customers coming to the store with a check in hand, that means the dealership is missing out on F&I opportunity.
So how do they combat that?
“A lot of it is training with our sales guys,” Zoerner said. One area Freeman Motor Co. hopes to focus on in early 2015 is training its sales staff to hone in on financing upfront and sharing what the dealership can offer, Zoerner added, particularly if the consumer has a good credit report and would be best-served to keep cash liquid and get a low interest rate.
Back at Wilmington Auto Center, Adkins said 2014 has been a “very good year for us,” and pointed to some of the best practices and techniques for improvement that he has picked up at the 20 Group.
“It’s amazing when you work at your business instead of in your business every day how much improvement you can make on a daily basis,” he said. “We give a lot of credit for that to our 20 Group here.”
Group 1 Automotive announced this week the expansion of its coverage in the United Kingdom with three new acquisitions. The dealer group has purchased Elms Bedford BMW/MINI, Elms Cambridge BMW/MINI and Elms Stansted BMW/MINI.
The three dealerships, which will continue to operate under the Elms name, are estimated to generate $225 million in annual revenues.
Earl Hesterberg, president and chief executive officer of Group 1, looks forward to furthering his groups influence across the pond.
“We are pleased to expand our relationship with BMW UK and further leverage our scale and excellent management team in the UK,” Hesterberg said.
With the addition of these three stores, bringing the tally up to 17, Group 1’s UK operations are expected to generated approximately $1.3 billion in estimated annual revenues. The company’s other brands in the region include Audi and Ford.
Dealer review website DealerRater announced the current leaders in its annual Dealer of the Year Awards Program for North America. The program awards U.S. and Canadian dealerships for distinction in outstanding customer service based on consumer reviews on the DealerRater website.
The final five dealers for each make, for those manufacturers that had more than five dealers nominated, have been selected for each country, with the final winners to be announced at the 2015 NADA Convention and Exposition in San Francisco, Jan. 22 through 25.
DealerRater will also introduce an expanded annual recognition program for top dealerships in North America in January, which will complement the Dealer of the Year awards.
“We are sharing the preliminary results for the 2015 Dealer of the Year awards to motivate dealers to prioritize customer service through the end of the year,” Gary Tucker, DealerRater’s chief executive officer, said. “We hope that this increase in customer engagement will encourage online reviews and sales. The frontrunners for our Dealer of the Year Awards Program lead by example through using online reviews to build trusting relationships with car shoppers and differentiate themselves from their competition.”
The complete listing of dealers currently left in the running for the Dealer of the Year Awards in the U.S. can be found here.
Privately owned SoCal Penske Dealer Group announced this week is has acquired the assets of both Drew Ford and Drew Hyundai in La Mesa, Calif.
Roger S. Penske Jr., SoCal Penske’s president, is committed to maintaining the legacy the Drew family has established during their time as owners of the dealerships.
“We are thrilled to add the Drew Ford and Drew Hyundai dealerships to our group and to count their employees, guests, and neighbors among our friends and family,” Penske said. “We admire the Drew family’s strong community ties and plan to strengthen community relations by making additional investments in the city of La Mesa and the surrounding area.”
Bill Drew, of Drew Automotive, believes the dealerships will be left in good hands as the reigns are handed over to Penske.
“The Drew family is grateful to the people of San Diego County for the opportunity to be of service to them all these years,” Drew said. “We are very excited to have an organization like SoCal Penske continue that legacy here in La Mesa, and continue to maintain the high level of standards in vehicle sales and customer service.”
The two dealerships will be rebranded as Penske Ford and Penske Hyundai and will both receive upgrades to their facilities.
On Monday, the management team at Larry H. Miller Dealerships made its second acquisition in the Denver metro area this year and 10th acquisition in the last 18 months.
Now the group’s eighth store in Colorado is Lakewood Fordland in Lakewood, Colo.
Lakewood Fordland has been serving the Denver market since 1962, and recently celebrated 50 years in a new state-of-the-art facility consisting of 60,000 square feet. The store is located at 11595 W. 6th Ave. in Lakewood and has been renamed Larry H. Miller Ford Lakewood.
“We’ve been in a period of growth over the last two years as the auto industry is strong and the Denver market is thriving,” LHM Dealerships president Dean Fitzpatrick said.
“Colorado is one of our largest markets, and we’ve done business in the state since 1987 when we opened our first store,” Fitzpatrick continued. “This acquisition shows our continued commitment to the Denver metro area.”
The group’s history in Colorado is a long one.
Larry H. Miller began his career as a parts salesman in Denver in 1970. In 1987, he opened his first store in the state, Larry H. Miller Toyota Scion Boulder.
In 1988, LHM Dealerships opened Larry H. Miller Liberty Toyota Colorado Springs. Larry H. Miller Toyota Colorado Springs opened in 1992, and Larry H. Miller Kia Lakewood and Larry H. Miller Volkswagen Lakewood both opened in 2001.
A Nissan store was added to the group in 2006, with the addition of Larry H. Miller Nissan Highlands Ranch. In May, LHM Dealerships opened Larry H. Miller Chrysler Dodge Jeep Ram 104th in Thornton.
“I’ve done business with the Larry H. Miller Group for nearly 20 years through their company that provides vehicle service contracts,” said seller Robert Liedel.
“I know they take good care of their customers and employees and actively give back to the community,” Liedel continued. “It also brings me comfort to know that they’re retaining my current team of employees and welcoming them into the LHM family.”
LHM Dealerships strongly supports giving back in the communities where it conducts business. Through Larry H. Miller Charities, the dealerships give back to communities by focusing their united service and corporate giving on women’s and children’s issues, with an emphasis on health and education.
Since 1996, more than $225,000 has been donated to nearly 70 qualified nonprofit organizations throughout Colorado.
Michigan Republican governor Rick Snyder signed legislation Tuesday officially banning Tesla Motors and any other carmaker from selling directly to car-buyers in the state, but this past weekend,Tesla chief executive officer Elon Musk hinted his position on direct sales is not set in stone.
Last Saturday, Musk sat down with John McElroy, the host of program AutoLine Daily.
When McElroy asked Musk if he could really scale up his retail model of company stores in all 50 states and how they would handle maintenance and repairs, Musk made a surprising admittance.
He said, relying exclusively on company stores probably was not enough.
“We may need a hybrid system, with a combination of our own stores and dealer franchises,” Musk told McElroy.
By the time of publication, Tesla representatives had not responded to Auto Remarketing's request for further comment.
According to the report, Musk made no mention of how this hybrid system may work and when franchises would become an option.
This discussion may come as a big surprise to those who have been watching the long battle between Tesla and franchised dealers across the country regarding its direct-to-consumer sales model, but it may just be part of the natural evolution of the company.
Now that it has launched a leasing and CPO program, and with new models in the wings, more Tesla’s mean more maintenance, repair work and customers — an influx of work that could potentially be solved by launching a string of franchised dealerships.
Auto Remarketing discussed Tesla’s new CPO program after the news broke earlier this month.
In an effort to source their new program, the company is giving Tesla Model S owners the option to return the car after three years and recover 45 to 50 percent of its sticker price.
It is still unknown whether Tesla’s move into the used market will greatly expand its audience, and analysts say there could be a chance the program will potentially cut into new-model customers.
The industry will also have to wait and see how the automaker prices its CPO units as the way the Tesla retail model is currently set up puts them in a place where they can potentially “control” the CPO market for the Model S, including price.
“They could control the roll out of used vehicles, and some could sit in reconditioning. They might cherry-pick others. So when you combine the idea that it is a used market but they are going to take the best of the best, and if they have the majority of them, it would be very easy for them to set a price with no negotiation, in that sense,” said Ivan Drury, Edmunds.com senior analyst.
The question is this: Is Tesla going to come up with a condition and mileage matrix to price their CPO models or rather go with pricing every vehicle individually based on market and technician review?
Auto Remarketing is hosting NADA Used Car Guide for a free webinar to help dealerships smooth out what consumers consider one of most dreaded parts of the buying process.
During the free session titled, “Close More Deals, Negotiate Less,” a pair of NADA UGC experts will ask dealers how satisfied their customers are with the store’s appraisal process and how it compares to recent research.
The Deloitte 2014 Global Automotive Consumer Study indicates that consumer dissatisfaction with the appraisal process is at 79 percent. That’s up from a dissatisfaction rate of 68 percent in 2009.
In this webinar, NADA Used Car Guide experts will identify the factors that are primary concerns for consumers and the actions dealers can take to improve the appraisal process. Managers will learn how to make the process one that consumers can understand, earn their trust faster and close more deals with less back and forth.
Webinar presenters Stu Zalud and Jim Dodd will demonstrate how taking the consumer through the appraisal process from start to finish, showing them everything that goes into the store number and presenting that number in an official appraisal document will close more deals faster, without the back and forth.
The webinar is scheduled for 2 p.m. ET on Thursday.
Leveraging more than 35 years of automotive retail experience, Zalud brings a dealer-focused perspective and insight to his role as director of dealer services for NADA Used Car Guide. Zalud joined NADA in this position in April 2007 and is responsible for promoting NADA Used Car Guide’s data and services to franchised and independent dealers, presenting at various industry events, and contributing to the development of future products and services to meet changing dealer needs.
Zalud’s previous experience includes 30 years as an Oldsmobile and Pontiac dealer in Cleveland and eight years as a Cadillac dealer in Hilton Head, S.C. In addition, he served on the NADA board of directors, NADA Used Car Guide board of advisors, and as chairperson of both the Greater Cleveland and Ohio Automobile Dealers Associations. He also served a five year term as a member of Ohio’s Dealer Licensing Division of the State.
Dodd joined the NADA Used Car Guide team in 2010, bringing more than 10 years of auction experience and dealer-focused perspective to his role as the account executive for automotive dealers.
At Southern Auto Auction, Dodd held various positions in sales and marketing. As Southern’s director of marketing, Dodd focused on information technology to develop electronic delivery systems that communicate auction information and data to dealers in real time.
Dodd was instrumental in the development and marketing of the industry’s first hand held utility, CarLots-2-Go, allowing dealers to download vehicle lists to their PDA or Smartphone through a WiFi network.
Dodd served on the board of directors for the Connecticut Auto Dealers Association representing the auction industry.
Dealers can complete the registration for the free webinar by going to this website.
Dealers who participated in KeyBanc Capital Markets’ monthly automotive retail industry update survey gave some candid comments about their used-vehicle prospects, especially in light of 44 percent of respondents saying they expected gross profit per unit to soften by about $50.
Despite that gross-profit expectation, the vast majority of dealers surveyed in September (78 percent) told KeyBanc that they projected year-over-year used sales to rise this month. Of that amount, a third thought that sales would climb between 5 percent and 10 percent, while another third said that the increase would be up to 5 percent.
Among the comments KeyBanc shared, the perspective of used-car managers who participated in the firm’s monthly project covered a wide array of dealership elements, but many focused on inventory and gross profit.
“My inventory levels were just right. We re-price inventory on an ongoing basis, but our gross profit per unit is relatively stable,” one dealer said.
“We didn’t experience any impact. Our Inventory was good in 3Q, and we didn’t see any real impact,” another dealer stated.
“Maybe a couple hundred dollars lower than last year, but I’m new to this store,” yet another mentioned about gross profit.
The connection between inventory and gross profit continued in KeyBanc’s survey, which prompted analysts to say they “remain bullish on the outlook” for dealers.
“We could’ve used more cars, but gross profit per unit was about the same,” a dealer told analysts.
“A little pressure in prices, but no real push on our inventory position,” another dealer added.
One store shared about how what vehicles were on the lot didn’t give the dealership a good chance to succeed.
“Wrong kind of inventory. Too old. Too many miles,” the dealer said. “No impact on gross profit.”
Meanwhile, one dealer comment showed some recent successes — and the strategy of how the store obtained them.
“Our gross profit per unit went up $488 compared to last year,” the dealer said. “If a car doesn’t sell within 20 days, we immediately re-price. We don’t wait.”
The final two dealers who shared how their stores are performing with KeyBanc also touched on inventory.
“Not enough cars was our experience,” a dealer said. “We actually went up in gross profit — more than $100.”
The last dealer acknowledged, “Yes, prices are coming down, but not anymore than normal.”
Beyond the direct dealer comments, KeyBanc’s monthly survey also highlighted dealer sentiment about F&I gross profit, how subprime borrowers are being financed as well as elements of the new-vehicle department.
The majority of dealers surveyed (67 percent) told the firm that F&I gross profit is on track to increase by less than $50, while another 22 percent saw that figure softening by about $50.
A total of 56 percent of dealers indicated conditions for subprime financing was staying the same as only 11 percent saw finance companies tightening their underwriting for potential buyers in this credit tier.
Finally on the new-car side, 56 percent think gross profit per new model turned would be staying flat while the remainder split evenly between that figure increasing or decreasing by $50 or less.
A substantial portion of dealers surveyed (44 percent) said they see automaker stair-step incentive programs remaining stable while another 33 percent thought OEMs are ramping up these initiatives.
With the launch of the company’s “No Surprises” initiative, TrueCar Certified Dealers must now share “upfront information” on any non-governmental fees in the transaction — like document fees — as well as the costs for any accessories they add on to the vehicle.
These fees and costs must now go alongside the Guarantee Savings off MSRP and are disclosed early in the process, the company said Wednesday.
This initiative, TrueCar says, “reflects the mutual commitment of TrueCar and Certified Dealers to transparency at every stage of the car-buying process,” and the company suggests that putting all this info out there from the get-go can cut the stress for shoppers.
“We here at TrueCar believe that truth and transparency are a more profitable way of doing business, and those ideals served as the impetus behind our decision to implement the No Surprises initiative,” said Scott Painter, founder and chief executive officer of TrueCar. “This increased level of transparency is going to have a positive impact for both buyers and sellers and is a giant step toward delivering a truly hassle-free car buying experience.”
TrueCar also emphasized that the initiative gives dealers a level playing field; with fees upfront, consumers can “make an apples-to-apples comparison.”
Andrew DiFeo — the general manager of Hyundai of St. Augustine, a TrueCar Certified Dealer located near Jacksonville, Fla. — reiterated some of those points, sharing how transparency can help build a better buyer-seller relationship.
"Being transparent and straightforward with regard to dealer fees ultimately helps to provide customers with the best car buying experience," he said in Wednesday’s announcement. "Disclosing more information throughout the purchase process — and providing our fees earlier on — can foster great customer relationships and build trust."
TrueCar president John Krafcik added: “We're narrowing the trust gap between dealers and consumers. As a result, TrueCar users now represent over 3.5 percent of all new vehicle sales in the U.S., and dealers are finding a stronger customer base that's ready to buy. While the No Surprises initiative has just begun, we are already seeing it as a win-win for dealers and buyers."
The company announced last month that its TrueCar Certified Dealer network now has more than 9,000 active dealer partners, including 8,000 franchised dealers and close to 1,000 independents.
And on Tuesday, TrueCar said this network has surpassed 1.5 million vehicle sales to TrueCar users, with more than half-a-million in the past 12 months.
"Consumers expect price transparency in today's car-buying environment, and that's exactly what TrueCar provides," Krafcik said in Tuesday’s announcement regarding the sales milestone. "Car buyers and TrueCar Certified Dealers are on the same page, they avoid miscommunication thanks to Guaranteed Savings off MSRP and, importantly, our dealer-partners are able to ensure a delightful car-buying experience for the consumer."
And it appears the company is moving even further toward promoting that transparency with Wednesday’s move.
