AUTOMOBILE DEALERSHIPS

Cost Savings: A Never Ending Battle

Tood Merriam CPA

Todd E. Merriam Manager, CPA, MSA
with

John Corcoran, Rinn Advisors

12 July 2021

The old saying nothing is certain but death and taxes should be updated to include cost increases. Especially over the last year, shortages in various consumer goods have driven the price of everything. While our industry has profited handsomely due to inventory shortages, cost management should always be at the forefront of any dealer principles’ mind.

Cost Savings Measures at Auto Dealerships

John Corcoran of Rinn Advisors specializes in helping businesses reduce costs on a contingent basis. John has worked with several auto dealers in New England on implementing plans to reduce costs. According to John, the top five opportunities he has seen with auto dealers are as follows:

1. Workforce Training Grants

Massachusetts has training-grant funds for businesses to increase profitability and help employee retention. Companies can receive up to $250,000 for each EIN. These funds can be used to hire trainers or utilize classes that can improve your employees’ service writing skills, sales techniques, safety, accounting, time management, and other topics which can help improve employee skill-sets and ultimately the bottom line. Recently, some clients have been able to utilize these funds for trainings offered by NADA.

2. Rooftop HVAC Retrofits

HVAC rooftop units drain power as fans in most rooftop units run 24/7. Electric Utilities have efficiency programs to retrofit these units with variable speed motors which turn the fans on and off as needed. These motors use sensors to determine the actual heating/cooling need rather than constantly running. This vastly improves efficiency and can reduce your utility bill by up to 15-20%. Utilities often have special programs where these can be retrofitted at zero cost to you.

3. Credit Card Fees

Escalating and added fees are the norm with relationships with credit card processors. Each month there is fine print notifying you of new or heightened fees starting the next cycle. These fees always go unchecked and eventually add up to a significant profit for the processors. Compare your first statement with a processor to your most recent statement; if there is a large jump in fees, it may be time to negotiate.

4. Insurance policies

Insurance is an area that dealerships can look to for cost savings. Insurance renewal costs have continued to increase with time. As much as they are trusted advisors, insurance agents are commissioned sales representatives. As one of the largest expenses in a dealership, negotiation discussions should start 6 months before the renewal to ensure enough negotiation time. By negotiating and reviewing early, dealerships have found opportunities to reduce your premiums while maintaining equal or better coverage.

5. Class-Action Payouts

Many dealerships have received significant checks from the Auto Parts class action suit in recent years. There are other large B2B class action payouts that dealerships can receive proceeds from:

Pending dealership cases:

CDK/Reynolds and Reynolds
Any dealership with R&R/CDK Dealer Management Systems after April 2014

Credit Cards
Any Visa/MasterCard/AMEX card processing after Jan 2004.

Nextgear
Any dealer using Nextgear floorplan financing 2005-2013

Television Advertising
TV ads since January 2014

Blue Cross Blue Shield
Any company which had BCBS after 2008. While we hope the profitable times of the last few months continue to last, it’s always a good idea to keep an eye on all vendor invoices for cost increases.

For further information on cost reduction strategies, contact:

Todd Merriam at [email protected] or John Corcoran at [email protected].

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