Customer Pay is King

Having spent my entire life in and around fixed operations of car dealerships there have been many changes. One of the sayings I’ve heard is that the only consistent thing in car dealerships is change. And serious change has occurred such as warranty work being down and the regulations associated with it climbing. They are building the cars better and have become more complicated to repair. Training requirements and equipment needs have drained resources while technicians have become challenging to find. The one thing that hasn’t changed is that customer pay is King. This doesn’t mean customer pay work doesn’t have its challenges. The truth is that every dealership must pay attention to the King in order to sustain profitability in fixed operations. Attention to details such as labor up frequencies and feature-benefit presentations improve results dramatically. Labor operations structure and set up can change gross profit margins dramatically, yet receive little or no attention. When is the last time your team reviewed labor up structure and profitability? Many dealerships are not even using maintenance and repair labor operations on customer pay work, after all who ever even looks at it? Dealerships today need to monitor customer pay extremely well with the percentage of this work exceeding 65. Every discount on customer pay needs to be monitored on both labor and parts daily. If it’s a problem vehicle charges to policy are preferred rather than discounts on labor that reduce customer pay effective rates dramatically over time. Parts matrix pricing on customer pay is critical to get a reasonable margin and advisers bullying the parts department to make discounts so they can keep their labor dollars high should never be allowed to happen in today’s environment. All margins on customer pay repair orders must be considered critical. Whenever we work with dealerships on our Margin Plus program to take advantage of new laws in 40 states that require manufacturers to pay retail pricing on warranty repairs we began with analyzing customer pay results. Your attention to the details of customer pay will bring dividends on warranty margins in these 40 states. Before long every state will have laws that require manufacturers to pay retail on warranty repairs. This is a change the manufacturers will have to accept. Even if this wasn’t the case customer pay will remain King and require paying attention to detail to get maximum performance. Always bow down to the King!

Rob Gehring, President
Fixed Performance Inc.
Office: (419) 433-8219

Fixed Performance complete fixed operations coaching consulting