Selling Vehicles to Your Own Dealership…Is It a Good Thing or Not?
It’s the end of the month and you’re two units short of hitting your sales objectives and bogie. What’s at risk—your possible $30,000+ dealer bonus pay-out? More needed inventory? Your manufacturer’s Zone Team pressuring you to “find those last two sales?” What do you do? That’s the million dollar question…literally. Do you sell the needed units to your dealership to hit or cushion your number?
Dealers often face this real-life dilemma. They are trying to increase sales, expose new products to potential customers, and provide great services. Then they are constantly pressured by the manufacturer to move inventory, meet or exceed their monthly sales objectives, and to report deliveries quickly, by the reporting cut-off. So ways to do all these can be challenging.
Don’t do the obvious wrong by pre-maturely or false-reporting a delivery. There are OEM programs that dealers can consider and take advantage of. Some have associated costs; others can be lucrative, but have to be properly administrated. Some are even incentivized (dealer allowances) to help off-set associated costs (insurance, floor plan, titling fees). It’s just a matter of finding the right program that suits your dealership.
- Dealer Daily Rental Car Program/Courtesy Transportation Vehicles—service/rental vehicles available for customers’ use.
- Driver Education Program—vehicles sold vs. loaned to local high schools/driving schools for driver training courses.
- Special Event Vehicles Purchased from OEM—used at Auto Shows, Super Bowl, NASCAR events, etc.
- For-Hire Livery Vehicles—funeral homes, resorts/hotels, limo markets.
Others programs with more limitations/restrictions:
- Units Sold to Dealer-Owned Entity— caution: vehicles sold to your other business entity (e.g. used car facility) could be considered a “sale for resale” or brokered unit, a violation and ineligible for any incentives.
- Qualified Dealer Fleet Units—fleet number required.
- Dealer Company-Owned Vehicles—parts truck, service shuttle van, snow-plow truck, etc.
- Demos—special equipment/product demonstrations (work trucks, snow plow).
Before placing any vehicles into service or finalizing any sales transaction, you need to know all the program rules regarding:
- Eligible models
- In-service/out-of-service periods—minimums/maximums (3, 6, 12-months)
- Usage Miles—minimum/maximum (2,000 – 7,500 miles)
- Titling/registration requirements (varies by state)
- Number of vehicles allowed in program
- Eligible incentives
- Required documentation (rental agreements, usage logs, mileage statements, applications, etc).
- Your disposal plans afterwards
Most importantly, know when, how, andifthese deliveries/in-service types count as a valid sale for the month and dealer bonus pay-outs! Depending on some programs, the timing of the in-service or out-of-service (for secondary sales) is critical as a sales count at the end of the month. Each program is different with every OEM, so be sure to check each program bulletin for all the rules.
Making-up the difference to get to a monthly sales objectives and a $30,000+ bonus pay-out sounds good; but if you’re not careful it could cost you even more huge, sales-audit charge backs if those deliveries are deemed ineligible. So be smart. Plan ahead rather than panicking and doing the wrong thing.
Sherralyn Peterson, automotive incentive specialist, with 30 years of automotive experience, helps dealerships prepare for sales audits, conducts compliance reviews, reconciles receivable schedules, performs staff training and resolves incentives issues. For more information, call 312-310-8380, email email@example.com,or visit www.sherralypeterson.com.