CP Parts Gross Transfer

[LivinDaDream]

Here's how I was taught many moons ago in the automotive business by some wise old owls. EVERY DEPARTMENT needs to be a self-standing profit center ... that means new car, used car, finance, service, parts, body shop. EACH with it's own columns on the financial statement. Not a break-even, but actually generating profits ... revenues out-weighing costs! No department should rest on the shoulders of any other department and I think that the "parts gross transfer" is exactly that -> -> -> GROSS !! THANK YOU GM !!

[Richard]

I hate it. I have a Fixed Ops Director with a severe service dept bias. I was out yesterday, and he created a new discount. See my complaint to the Controller.

6200022. Part sale was $194.75 Gross profit on part was $112.96, service takes 50% at transfer or $56.48, leaving parts with $56.48 profit, until the discount, which parts gets hits for $53, leaving a net profit of $3.48. Not sure who created this discount, but it sure isn’t well thought through.

Controller says he can do whatever he wants.

How much was service hit for on the discount?

$37

But he had 5 hours of labor at $110, costed at $20 making him $450 in profits.

[TimK]

I hate it. I have a Fixed Ops Director with a severe service dept bias. I was out yesterday, and he created a new discount. See my complaint to the Controller.

6200022. Part sale was $194.75 Gross profit on part was $112.96, service takes 50% at transfer or $56.48, leaving parts with $56.48 profit, until the discount, which parts gets hits for $53, leaving a net profit of $3.48. Not sure who created this discount, but it sure isn’t well thought through.

Controller says he can do whatever he wants.

How much was service hit for on the discount?

$37

But he had 5 hours of labor at $110, costed at $20 making him $450 in profits.

Plus $56.48 in parts so a total profit of over $500.

A discount of $90 should be split worst case:

$67.50 service
$22.50 parts

[Fixed Ops Mgr]

Parts and service used to split discounts 50/50 in my store until I wised up and saw how much parts was losing in gross transfer and then discounts on top of that.
Many transactions I was coming out in the hole so we had a meeting about this and now we are splitting the discounts to 75% to service and 25% to parts. I believe
this is more fair because service makes an average gross of 80% on labor and parts makes and average gross of 30% on parts. Discounts will kill your profit!!!

I am trying to tackle the whole gross transfer issue right now to try and make things more fair for parts.

[Zep33]

Parts and service used to split discounts 50/50 in my store until I wised up and saw how much parts was losing in gross transfer and then discounts on top of that.
Many transactions I was coming out in the hole so we had a meeting about this and now we are splitting the discounts to 75% to service and 25% to parts. I believe
this is more fair because service makes an average gross of 75% on labor and parts makes and average gross of 30% on parts. Discounts will kill your profit!!!

I am trying to tackle the whole gross transfer issue right now to try and make things more fair for parts.

How are the dealership expenses divided? Where I was last, laziness in the accounting office divided everything equally between new, used, service and parts. That was so unfair as I was paying the same for a small room with 2 employees as service payed for a huge shop with 13 employees. That was for electric, rent, everything, etc... Also dealt with the 50/50 gross transfer and 50/50 discounts. The discounts were also lazily split 50/50 off the total discount not accounting for what exactly was being discounted. parts was rarely profitable after all that and rightfully so. At least the owners understood it was just #s being moved around.


Where I am now, at a corporate group dealership, it is done much more fairly. New pays the most, service 2nd most, then parts and used cars close behind pays the least. At least it makes sense. We do split service and parts discounts equally as a % of the RO line so sometimes parts pays more, sometimes service pays more. Obviously a 10% discount on a 600 steering rack will cost parts more than service because it's only a 1.5 hour job. So to round it up to labor being $200 on the job, service would only be paying $20 of the discount and parts would pay $60. Same 10% discount at my last place would have been $40/$40 but service would then have been awarded another $150 during the gross transfer. That is now fair as far as I'm concerned. I'm with Toyota now so there's no more 50/50 gross split and we are profitable every month.

[greenthumb-38]

how about 35/15 and 35/15
(35 for New Car and Service, and then 15 for Used Car and Parts for ALL dept splits like utilities)

then 80/20 when split between Service and Parts (mailers and other advertising).

I think that too many sales dept expenses are split to all depts., but when similar expenses hit me, I have to pay the whole bill.

~gt "seems fair to me"

[Zep33]

Here's how our "rent" is split:

New - 11403
Service - 9891
Parts - 5418
Used - 4788

total 31500 - other fixed expenses follow the same formula I think.

I'm really not sure if it's based on sq footage although it may be. I know that is common way for some to do it.

We recently went through all expenses and fixed a bunch of issues of employees getting paid by wrong depts, paying for stuff that had nothing to do with them, etc...


BTW, sorry to derail the thread but it is a little related I guess

[LivinDaDream]

it's the old 30/30/20/20 allocation around here ... I've worked other dealers where it's the same breakdown. (new car/service/used/parts)
And BTW, we're paying $100K per month for rent for the dealership. Our service and parts advertising split is 70/30 which is reasonable. Service is expected to make 70% on every dollar billed, parts is making 40% overall.

[Zep33]

it's the old 30/30/20/20 allocation around here ... I've worked other dealers where it's the same breakdown. (new car/service/used/parts)
And BTW, we're paying $100K per month for rent for the dealership. Our service and parts advertising split is 70/30 which is reasonable. Service is expected to make 70% on every dollar billed, parts is making 40% overall.

I'm pretty sure our rent is only 31500 because the group actually owns the building and property but still charges us rent as an expense. I would assume that's normal. Rent was 200 or 250k at my last dealership

[Richard]

I hate it. I have a Fixed Ops Director with a severe service dept bias. I was out yesterday, and he created a new discount. See my complaint to the Controller.

6200022. Part sale was $194.75 Gross profit on part was $112.96, service takes 50% at transfer or $56.48, leaving parts with $56.48 profit, until the discount, which parts gets hits for $53, leaving a net profit of $3.48. Not sure who created this discount, but it sure isn’t well thought through.

Controller says he can do whatever he wants.

Sooo, how profitable is the service dept. really ?!?!

Due to being way overstaffed, it loses money every month.