Hello and welcome back for the last part in my five part series regarding the 2011 AICPA National Auto Dealership Conference. In this blog, I will focus on the breakout session I attended called “Automotive Benchmarking with a Simple Approach for the Auditor, Accountant and Management”. Being a CPA and an auditor, I must say that I feel I have saved the best for last. There is nothing that interests me more than analytically reviewing financials to help my clients focus on where they can improve in the businesses.
During this session, we focused on what it takes to perform good benchmarking. The first thing is to have good bookkeeping. What does this mean? This means that you should be following generally accepted accounting principles, income and expense items should be properly classified and all accruals need to be complete.
Some gross profit benchmarking targets that were discussed were as follows:
Overall
Net income = at least 3% of sale
New and Used – Gross profit per unit
New cars – $1,200
New trucks – $1,700
New high line – $3,200 (included back end money)
Finance – new vehicles – $200
Service contracts – new vehicles – $700
Used vehicles – $1,700
Finance – used vehicles – $400
Service contracts – used vehicles – $800
Service – Gross profit as a % of sales
Customer paid labor – 72 – 77%
Warranty labor – 75%
Internal labor – 72%
Sublet – 15%
Body Shop – Gross profit as a % of sales
Customer paid labor – 65%
Warranty labor – 60%
Internal labor – 60%
Sublet – 15%
Parts – Gross profit as a % of sales
Customer paid – 42 – 45%
Body shop – 35%
Warranty – 30% (state with-out retail law)
Warranty – 45% (states with retail law)
Internal – 30%
Counter retail – 45%
Wholesale – 25%
In addition to the above gross profit benchmarks, we also discussed various benchmarking on the expense side of the business and benchmarking as it relates to your balance sheet. Both the expenses and the balance sheet also need to be monitored on a monthly basis to ensure you are a profitable dealership. Stay tuned to my future blog submissions as I will give you more details on benchmarking these important areas of your business.
Brian Campbell, CPA
