RAB Radio Training Academy

21 Dealer Terms

Relate! Put Radio Terms Aside… Talk In Terms Dealers Know and Use

Dealer Terms

RAB Radio Training Academy

F & I• Finance and Insurance• Profit in finance• Profit in loan payment-

interruption insurance• Extended warranties• Accessories

– Floor mats– Undercoating– Rust proofing

• As much or more profit for dealers as vehicle sales

Dealer Terms

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Ups• Customers who walk-in• Have not been in before

Dealer Terms

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MSRP• Manufacturer Suggested

Retail Price• Sticker

Invoice

• Price to the dealer• “We’re selling at invoice!”

Dealer Terms

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Holdback• Generally about 3% of

invoice• Sometimes sliding rate as

incentive based on models, quotas…

Dealer Terms

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Dealer Incentives• Often around ½% of

invoice• Sometimes flat amount• For moving a model,

quotas, no HOCs…• Listed weekly in

Automotive News

Dealer Terms

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HOCs

• Home Office Complaints

Dealer Terms

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CSI• Customer Satisfaction Index• Developed by J.D. Power &

Associates• Factories push it• High CSI looks good for Brands

in their advertising• Pressures dealers to hire more

people• Factories use it

– Tie incentives to it– Tie allocation to it– Tie special ads to it (“Your 5

Star…”)• Turned into a meaningless

joke?

Dealer Terms

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Back end (of the store)

• Service• Parts• Body shop

Back end (of the deal)

• F&I• Pack

Dealer Terms

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Pack or Packing• Or “packing the deal”• Additional costs added

onto an invoice• $400 - $600 • Covers cost of detailing,

gasoline, fluid top-offs…• Includes additional profit

for the dealer• Sales commissions

exclude packDealer Terms

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Absorption• Percentage of total

expenses covered by backend profits

• 100% is the ultimate goal• 70% is a realistic goal• Variable based on front

end sales

Dealer Terms

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Variable Gross• Front-end expenses• Unlike backend fixed

rates, front end expenses likely vary

• Includes sales commission, delivery expense, floorplan interest, and advertising

Dealer Terms

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Floorplan• The loan to the dealer to

pay for the inventory• Factories get paid when

the dealer takes possession of the vehicle

• Banks usually lend at a favorable rate

• Floorplan interest is interest paid the loan-holder upon the sale of the vehicle

Dealer Terms

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Inventory• New vehicle goal is about

60 days• Used goal is about 30-45

days

Dealer Terms

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TO house• Turn-over house

Dealer Terms

The Tower

• Sometimes a raised area for the sales managers in the showroom

• Sometimes figure of speech to refer to sales management

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Dealer Terms

RDR

• Retail Delivery Registration• Management Information

System (MIS) at Mercedes• Daily Operating Control (DOC) at

Dodge

Turn and Earn

• The more cars a dealer sells, the more he earns in allocation

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Gross and Net• Dealers use “Gross” for

Gross Profit – profit on a vehicle before sales commission and delivery expenses are paid

• “Net” is for Net Profit – profit on a vehicle after sales commission

• “Net Profit” usually refers to total dealership profit after all expenses are paid

Dealer Terms

RAB Radio Training Academy

Upside Down• Customer owes more on a

trade-in than it is worth

Dealer Terms