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Don’t Let the chip supply shortage destroy your profit

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The chip shortage has created an inventory shortage that looks to be getting worse. It may be some time before the OEM’s get back on track with a steady supply of vehicles for dealers.

The lack of new vehicles has increased the cost for the dealers to get used vehicles as well. The price increase and inventory shortage are limiting sales for many dealers already. It is likely to worsen before it gets better, so dealers need to focus on getting every dollar of profit out of each sale.

Dealers will need to absorb a 2%, 5%, possibly even a 15% decrease in monthly sales before things start getting better. Getting more profit out of each sale is a priority for our dealer clients. When times are good, sales are brisk, and profits good, dealers often overlook ways to maximize profit on each deal. They don’t do this purposefully. It’s a matter of time and effort needed to maximize profit versus accepting ‘Good Enough’ deals.

‘Good Enough’ can be very profitable during good times, so most dealers don’t spend the time focusing on how to squeeze another $100 out of each deal. The bottom line looks good every month, and the team is getting good incomes/commissions. However, when sales decline and overhead stays the same, profit per deal takes a front seat.

What happens for your dealership when you can capture another $100 in F&I income per deal?

Are you a 100 unit a month dealership? That would add $10,000 in revenue. 400 unit/mo or more dealership? Do the math and see what you could add to your monthly revenue.

If you’re a 100 unit dealership and took a 10% sales reduction and only closing 90 vehicles during the inventory shortage, would $9,000 in additional revenue be helpful to your bottom line?

We know it would, especially when you can capture these missed dollars easily and accurately with technology. 

Technology can organize and automate the lender decision data returned through RouteOne and DealerTrack. Automating the calculations and recalculations for any changes in the deal for all the lender decisions is key to making sure you see maximum profit based on all lender data. The automation allows F&I managers to focus on getting the maximum profit out of the lending partners instead of wasting time manually calculating profit for every deal.

Easy, fast, accurate, and driving maximum profit on the deals you sell every month.

When sales are constrained, getting every dollar of profit from each sale is vital. When supply returns and sales volume returns to normal, you will be even more successful due to the increased profit margin on each sale.

If you are interested in learning more about ProfitIQ and ready to start capturing every F&I dollar most dealerships are missing every month, please reach out to us at – sales@creditiq.com 

Kent Mihlbauer
Author: Kent Mihlbauer

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