Cash is KING...but income is SURVIVAL.

Brad Bossen
Keeping dealership assets liquid! First stops are the Used Car and Parts inventories. Used vehicles are a depreciating asset while parts on shelves are unavailable cash. Scenario: You have a vehicle on the rack and no parts to complete the job. Parts Dept calls the closest like-franchise and requests the parts, the competitor charges "cost-plus" for the item. (As much 30%+). Now cost an employee in a vehicle or a contract service driving to the franchise to retrieve the part. Add the loss to Service of the time for the tech and the rack; and the increased parts costs that will be passed along to the Service Department as well. The ASM has already quoted the job to the customer so the RO labor expense is reduced to make up for the increase in parts cost. (Or claimed as an error and passed along to the customer! Ouch!) So, yes your parts inventory has been reduced, more available cash in the bank and you see no significant financial impact! In fact the Parts Department is enjoying increased sales volume from the overpriced parts. But if you'll look at your reduced labor income in Service you'll appreciate who is paying the bills! (Increases your franchise used car repairs too!) Who should be paying the increased costs for lack of inventory? After totaling all the indirect expenses, what is the REAL percentage of your parts costs? Be prudent…but be smart.

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