- 16 Aug 2021 Author: Michael Johnson
With such notoriously low profit margins, how do dealerships make money on car sales? Sometimes they don’t. In Australia, for example, average profit per car sales dropped from 2.3% in 2012 to 0.4% in 2018 — according to a Deloitte study.
But why are profit margins shrinking? One reason is that pricing information is so freely available that customers shop around for the best deal. This cuts into margins as dealerships face pressure to match low market prices. Returning to the Australian car market, it is true that sales profits have increased in 2021 due to higher demand for vehicles — especially for used cars. But this is temporary. A report by Moody Analytics predicts, vehicle demand has peaked and that prices will soon fall. Soon Australian dealers will return to the status quo where expert salesmanship earns 0.4% profit per car sale.
So how can dealerships stay competitive on thin margins?
To stay competitive, dealerships need tools that can help ensure that every inventory and sales decision maximises profit. Dealerships also need to empower their teams to deliver more value while spending fewer resources. Enter automotive business intelligence (BI). In this blog post, we unpack how dealerships can use automotive BI to stay competitive and increase their profit.
How Automotive BI Drives Profitable Decision-making
Traditionally, dealership managers rely on their experience and instinct when making deals. But these factors are no replacement for concrete data. The right dealership intelligence tool gives you a clear picture of your revenue across your departments, so you have the data you need to maximise profit.
Imagine a scenario where your sales manager rejects a deal because “they’ve already pushed the price too low.” In this instance, your manager is making a decision based on one profit point — how much profit you’ll make in this one car sale. But to make the best possible decision, they need to consider how much profit each sale can generate from all your departments, including finance, aftermarket and service.
By focusing on all your revenue streams, BI solutions ensure that every decision you make is supported by data and that it generates healthy profits. But to accurately predict per-car profit throughout your deal pipeline, you need a solution that can break down data silos and give you a clear view of dealership processes.
Stay Competitive With Automotive Business Intelligence
What Are Data Silos? And How Do They Limit Profit?
Have you ever lost business because a part wasn't ordered or a vehicle service wasn’t properly booked in? Then you might have a siloed business.
Data silos form when key information is accessible only to certain employees or only within one technology application. This is common in dealerships, where each department manages its own data sets and spreadsheets. Often this creates friction in the deal pipeline, as teams aren’t given the information they need to work efficiently. Data silos also reduce productivity, as managers spend time duplicating data entry or chasing down information from other departments.
Many automotive business intelligence tools are specially built to prevent the data silos that form in dealerships. SalesLogs, for example, provides one integrated system for data entry. That means that you don’t need to pull data from scattered spreadsheets to get a clear and real-time view of dealership profits and performance.
Eliminating data silos and gaining a clear view of per profits is the first step to boosting profit. The next step is to improve team performance.
How Automotive BI Empowers Your Dealership Teams
Your business does well when your employees are performing at their best. The right business intelligence tool can track employee performance, giving you insights into what you can do to improve their output. KPI dashboards, for example, show you what vehicles are being sold, along with who has been selling them. This data helps you identify which employees need coaching and which successful employees your teams can learn from.
Tracking teams KPIs also helps you recognise flaws in your dealership processes. For example, you might have a workflow issue that limits team performance. With KPI tracking, you pinpoint these issues and work toward solving them.
As you improve your processes and performance, you can set higher and higher targets to achieve. And the more targets you hit, the more you raise your profit margins.
How Automotive BI Helps Dealerships Stay Competitive
To stay competitive, dealerships need to boost team performance and make decisions that maximise profits across their departments. That’s where automotive BI comes into the picture.
The right business intelligence solution can provide a centralised platform to input and access all dealership data — arming you with the information you need to maximise profit in each and every deal. These tools also help you drive performance through KPI dashboards that track team performance.
At SalesLogs, we offer an out-of-the-box business intelligence tool that is custom-built for the dealership environment. It’s also designed for effortless data capture and information sharing, making it easy to eliminate data silos.
If you’re interested in working together to boost your profit, click the link below to contact a sales representative or request a product demo.
