secretsnew2fCar Dealer Secrets

CSI

In the past fifteen years, customer satisfaction has influenced the new car retail market heavily. “C.S.I.” stands for “Customer Satisfaction Index.” Every new car manufacturer has an index that rates the performance of their dealers. This index is a score of the customer’s buying experience and it is calculated by responses to a survey that is mailed or emailed to the customer. What is important to remember is that the dealer’s allocation, “Hold-Back” and bonuses can be influenced by this score.

Car Dealer's Internet Sales

Car dealers’ Internet and Fleet departments have grown in size and profitability in the last 15 years. Over seventy percent of the car- buying public goes online to research and shop for their next new car. The attraction to buying a car online is simple: get the best price without the hassles of going through the games or gimmicks of normal negotiations. However, there are potential pitfalls to this strategy. Believe it or not, Internet and Fleet departments that appear to sell cars at a discounted price make some of the largest profits for the dealership. These profits are generated from the “Back-End,” which you now know is profit generally made from financing and leasing.

The Back-End Profit

What customers don’t know won’t hurt them. The price, trade-in value and interest rate are all printed on the sales contract for the customer to review. However, what most customers don’t realize is that the actual dealer profit is often hidden in the “Back-End” and is not disclosed in the sale. This “back-end” profit can be as much as half of the income that is made on a modern car sale. Furthermore, if a customer purchases a car through an Internet or Fleet Department, the dealer’s “back-end” income often accounts for most of the profit.  The “back-end” can consist of profit made from the interest rate, money-factor, warranties and sealants (Mop-and-Glow). Also, the dealer’s “back-end” profit can be produced from add-on items such as accessories, alarm systems, gap-coverage, and insurance covering the loan (LA&H).

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