Internal sublet mark ups

[wrenchbender]

How much mark up are you all charging on items the sales dept purchases thru subleting, such as leather interiors, some truck accessories, special wheels and tires, sunroofs, aftermarket type pwr accessories, etc.
Service used to write repair orders on any such items, and they were then marked up according to an aggressive dlr group variable matrix %, which allowed 1) a check and balance on what was being sublet, 2) kept pricing more in line with what it would cost to do in house, and 3) since sales ussually sells from a cost plus basis, sales would normally go get the additional cost from the customer, thereby attaining additional gross to the dealership, thru the service dept. (service gross pays a much lower commission than if grossed in the sales dept.) Recently sales started bypassing the repair order route, going straight thru the office mgr to get their purchase orders, to avoid the mark ups, billing directly to the vehicles cost, they reaped the additional gross on the accessory.(They reasoned with the dealer, that service did nothing to earn anything, so why should they get any mark up on these items, (they did all the chasing).)(he fell for it) I agree that service doesnt probably earn the gross on sublet that was occurring, but we have to have a record of these sublets being done, in case of warranty repairs etc, and there is expense to write repair orders, and the dealing with them for warranties that could occurr after sale.
So, I suggested going back to our prev straight 10% mark up on sublets done on service ro's, but then our dealer started to think that would be too costly, I think it started him thinking about why this mark up was done in the beginning, as i stated above. Anyway, I would like an idea of how much mark up every one is doing out there, and are their any variations on this situation that would gain the benifits of additional gross from the deals that this gets, with out the bi#!hing of the sales dept and the around the bush attacts to bypass it.

[scotstrong]

Here's the bottom line:

What dept. has to deal with the customer when "warranty" work is required for the aftermarket installations? Rarely is it the sales dept. The lousy 10% to cover the costs of generating PO's and RO's in order to have an accurate history on the vehicle and to deal with the repercussions with the customers is NOTHING!

Item #2: The dealer is paying the 10% to himself. It is not like he is paying it to the outside vendor.

Scot Strong

[wrenchbender]

Scott, I am in agreement with you on both your points. In my opinion, marking up sublets a min of 30% is only smart (for the whole store). Our reality is that the Sales dept sees this as a area they can easily effect, if they can convince the dealer to listen, or can subnavigate the system without notice at least for a while. This subject it seems needs the long term view of how profit flow in the dlrshp., and will need the dealers hard nosed support to keep this in effect. In our case, my dealer kinda forgot this rational, till i raised the (as you said) redicules 10% figure (I had hoped it would jog his memory).
I just want to hear what others are doing, to see if there are other ideas on this or a more accepted mark up percentage that is being used. You did not mention what your mark up is on these items.

[scotstrong]

We use 10% internal markup for sublet.

Scot

[Ronc925]

First, the dealership should be marking up all sublet purchases. If nothing else as a method of retaining gross profit that the sales department can't give away and it's passed on to the customer.

Second, if you ever have to go to court with your service department's vehicle history file, what do you think the judge will say with 1 missing document. The whole file will be invalidated. True, the documents are in the office, but isn't that file supposed to be EVERY thing about the vehicle from receiving to junkyard that occurs in your dealership?

Any additional profits the sales department thinks they are getting by avoiding sublet mark up is being given away through sales person commission increases, because their grosses appear higher.

The service and parts department pays a portion of the office's expenses. You just dropped one way of helping pay thier paper processing fee--your portion of the Parts or service departments way of supporting the office staff. Did they reduce you monthly office expenses while providing a "free" service, or did they increase their sales doce fees and sales departments office expense load to compensate the office processing what the service/parts department used to do? Doubt it.

[wrenchbender]

Ronc925, good points. so what does your store mark up these type items, and is it the same for all catagories of internal sublets?

[Ronc925]

I don't currently work in a store, but when I did, it was 25% on everything bought outside. We did it all through the parts department, who was the only department that could write a PO and authorize outside payment for a vendor on vehicle related expense. I reviewed all outside purchases for the possibility of doing it in-house. The sales departments also had to start with a 15% mark up above their dept's cost; but, if they so choose, they could drop to 0% mark up. But they couldn't touch the P&S dept's mark-ups to them.

The dealer wanted it that way, especially after showing him the majority of savings by going outside and avoiding a 25% markup went in to the sales person's & sales manager's pockets as increased commissions, and not his pocket. Going outside and using the office caused the office more work and didn't have the responsibility of making sure the purchase was the best deal for everyone. My personal goal was to keep as much as possible in-house and keep my departments happy.

[STEVEH]

Our policy is if it could have been done in house then it is marked up 30%. Otherwise each PO the parts dept generates is a $10.00 markup.

[wrenchbender]

thats a new one, 10$ per po. since i started this, the dealer decided to be at 30% mark up on all, except things we cant do like leather interiors, some accessorie packages for trucks, sunroofs, etc. those he wants 0% mark up. with all the big items having no mark up, our gross margin for sublet will take a huge dive. we were at @20% before this. thanks for the thought steph.

[johncd]

All of our sublet repairs are set with a 25% markup. The only override would be for body shop sublet repairs that we are being paid for (we do not have a body shop) along with mechanical repairs. 25% for CP, Internal or Employee. This gives us our required (dealer group) 20% gross profit of sales.