Finance Office

Technology Could Cost You: Three Areas BHPH Dealers Should Review

October 2008, Auto Dealer Today - WebXclusive

by Brent Carmichael - Also by this author

Technology, or lack thereof, could be costing you millions. OK, millions may be a bit much, but thousands doesn’t sound any better. Either way, profit dollars could very easily be leaving your pocket on a monthly basis and at an alarming rate.

Technology, or the lack thereof, is costing dealers in every market and in every state across the country. These dealers are either technological junkies or technologically challenged. Neither scenario is conducive to future success. In the current economic climate, having and using what is necessary for the foreseeable future makes the best and only economic sense. Not too much, not too little.

Technology touches many facets of the buy here pay here industry. Video surveillance, starter interrupt/GPS and software are the most popular areas for technological discussion in BHPH. These three areas seem to be the most under- and over-utilized. Of the three, software, or a DMS, is the only one that is mandatory to not only current but future success as well. The other two areas are matters of personal preference.

The first of the three, video surveillance, is probably more over-utilized than the other two. Too many dealers have thousands of dollars tied up in high-tech systems that are really not necessary. These dealers have convinced themselves that they are preventing not only outside theft, but internal theft as well.

Although surveillance systems have proven to aid in the deterrence of both kinds of theft, some dealers go overboard. The decision of whether to use video surveillance should be based on specific market conditions in regard to preventing outside theft and help to provide additional security. A lot displaying 20 or so vehicles located in a small rural market and employing a total of four people doesn’t necessarily need a 16-exterior-color-camera system with real-time Web access. This example may seem extreme, but this dealer exists.

As far as preventing internal theft, the money might be better spent in developing the organization’s culture. Studies have shown that office supplies are the most commonly pilfered items in a business, not money. This is a direct result of lack of pride and ownership by the employee in the business. Background investigation and personality profiling prior to hiring a new employee, ongoing training, and open lines of communication after hiring are all ways to instill and improve an organization’s culture. There is a good possibility that these practices will also reduce turnover and, in most cases, prevent if not halt employee theft—and more than likely they will cost less over time.

Second are payment devices. Starter interrupt, GPS and combo devices are still a topic of great debate and ongoing discussion. This is one of the areas that seems to be either black or white in most dealers’ eyes. Dealers seem to be 100 percent for them or 100 percent against them, nothing in-between. Data shows that they can increase collection dollars and, in some cases, reduce the amount of personnel needed to manage a portfolio. Data also shows that they do not have a significant impact on loss rates.

This data is what is causing the “all in” or “all out” mentality. There are just as many highly successful dealers not using devices as there are using them. As with any technological advance, they are only effective if used as directed or intended. Too many dealers who purchased them don’t use them, which is a waste of money.

The decision to use devices, and specifically which kind, is a significant one. It is a decision that should be based solely on the dealer’s personal business philosophy. As with any business decision, it shouldn’t be made until all the homework is done. Also not to be overlooked in the decision-making process is preparing internally . Policies and procedures will have to be created and implemented to support whatever decision you make.

Last, but definitely not least, is software or a DMS. This is an area where dealers have a tendency to cut corners and cost themselves more in the long run. It is an area where bigger is not necessarily always better. Software packages have seen significant technological advances in recent years and the number of provider options is increasing. For better or worse, there seems to be more providers than actual dealers. More options provide a more diversified product offering and pricing structure which is good. But if and when it comes time to change or choose, it can become information overload and overly time consuming when trying to comparison shop.

Technology can take any business to the next level. Technology can also set any business back. The key lies somewhere between being a junkie and being challenged. Which one are you?

Vol 5, Issue 9

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