Internal Labor Rate

[SWEED]

Our GM is trying to lower the internal labor rate. Currently our stores are 8% below door rate with special considerations if conditioning is over 1k. Any thoughts?

[This message has been edited by SWEED (edited 01-15-2010).]

[Backlash]

He/she is an idiot.

[Richard]

+1

Why do these hacks not see that chopping the internal rate just steals money from one pocket to put in another?

Full retail on both parts and labor. Helps keep your fixed coverage up, and in the end helps cover some of the expense of them selling cars.

Some dealers think that lowering the cost of a car makes it cheaper to sell. It really doesn't, it increases the profit (maybe) but also increases the margin that the salesperson/sales managers/F&I people get paid on, wiping out any 'additional' profit that was made by 'lowering' back end costs.

It's a delicate balancing act, but just the way dealership accounting is done, keeping the rates at retail work best.

[AKTOYPM]

+3
Any savings will be given away by Sales or will have 20-40% commisions payed on it.
Sales sells from cost up....whatever that may be.

[btk]

2 years ago I would agree with everyone on this topic-maybe with age I have softened my belief on this topic-sales does NOT sell from cost anymore-they sell for what they can get for it based on market conditions and blah,blah,blah. We were approached by sales, GM and the owner on this topic and what we have found that on reconditioning, the majority of expense came from tires and brakes-we would not discount tires and or brakes when we sold them to sales. We have now given sales the same price that we quote to our retail customers- tires are 10.00 over cost and my labor rate is adjusted according to the same guidelines that we charge our retail customer. Little changes like thses, can drop over all recon to acceptable costs

[robc]

I agree BTK - charging retail on internals means that to me - your normal retail price. If you give a break on brake work, etc. to the general public it should be the same. It would not mean charging out tires at cost+85% (as an extreme example).

Related funny story. I had a sales manager whining hard about internal pricing. Service manager was agreeing to be competitive where he should and had to be - but the sales manager still wasn't happy. At one point he said - I'll just hire a $12/hour tech, expense him and have him do all the reconditioning. That is when we brought up lost gross that was built into the deal via recon. The sales guy said "Well I'll just pack the deal to offset that a ratio of the recon costs." At that point the dealer finally chimed in and said, "I already do that - it is called internal labor and parts." I think the point finally got through.