Will the Bank Scare Hurt?

Watching the news about several banks failing recently brought up some scary memories of 2008 and 2009. Hearing the reason why it happened didn’t bring much comfort. Regional banks are getting bailout money and that is likely to continue.
Markets seem stabilized for now; however, dealerships must take notice of actions needed to protect cash.

• Do I have unprotected funds that may be a concern?
• Will auto loans become more difficult?
• How will this affect contracts in transit?
• How will this affect cash flow?

All reasonable questions: which of these issues do we have complete control over? It would be easy to make knee-jerk reactions and potentially make decisions that could be harmful in the long run. The big question is what can we do to weather the storm and better position dealership cashflow? It’s likely higher interest rates will continue, and this may cause a delay in the buying cycle for new and used vehicles. We must be aware of the current financial conditions of the banking institutions, and how they might affect our businesses.

Recognizing opportunity has always been the trademark of well-run dealerships. One solid opportunity often overlooked is fixed operations. As the timeline of the buying cycle increases, the average age of vehicles has grown to over 12 years. All of those vehicles need service. Preventive maintenance on these vehicles often goes without a recommendation. Margins for both parts and labor often go unchecked without review. Labor rates and parts mark-up factors go unchanged. Even with that said, overall fixed operations margins exceed 50% but that can be improved, and better-fixed absorption is what every dealer needs.

Our company has received many requests for warranty margin increases under state law for both parts and labor. As we process these increases, we help our clients get the rates and the margins dealerships need to keep up. Are you ready to improve your fixed operations? If so, let’s chat soon and reduce the risk from the recent banking crisis we might be facing.

Doug Thompson, President
Fixed Performance Inc.
Mobile: 440-552-4657
Web: www.fixedperformance.com