October 12, 2023

A Word from MTIADA President, Chad Randash

I hope that your October is off to a great start. I have spoken to several dealers in the last few weeks

and the conversation usually comes back to the interest rates and the UAW Strike and how this might

affect our sales as well as our supply of vehicles here in Montana. A few dealers had some concerns that

with the record price of cattle, the ranchers might be wanting to upgrade their equipment by years end

and dealers want to make sure that they have the inventory ready and available. Parts supply is also a

concern with this Strike, and I tend to think that all Montana Independent Dealers wish that they had

more clarity in what the future holds.

My Dad always had great advice to give me when I got into this business. He would say, “son run this business - don’t let this business run you.” This can be difficult sometimes but being proactive is almost always better than being reactive. Here are some key items that we are paying attention to:

There is a long-standing argument that as a dealer, do we make money when we buy the car or sell the car? I am on the side of when the dealer buys the car. And although the inventory has gotten more expensive, we live in a time where we have access to more inventory options than ever before.
Visit your local Parts-House(s) they have insight that as an independent we might not be able to see right away.
Take a hard look at your vendors that you are currently using. Is there any room for a better deal? Is there another option?
If you have a Floorplan or a Line of Credit, revisit the covenants in that contract and make sure you understand what is expected of you. Now is the time to shore up that relationship with that lender and talk with them about where you are at and where you are going in your business.

I had a good friend recently explain to me that from his viewpoint, people do not decide their future, they only decide their habits and their habits decide their future. I hope that you are putting into place the right habits to make your business the best it can be.

For all members and non-members, I wanted to thank everyone involved and trusting in the association. The most common thing that I hear from all independent dealers is, what can the association do for me? As the President of this association, it is my intention to first deliver a consistent message of local and national news items that may affect your business. In addition, I have asked for strategic partners like Buckeye Dealership Consulting, PassTime, Kinetic Advantage, MVD Express, ADS and others to help light our way. But we also need Dealer Participation. With a consistent message and dealer participation on the board as well as in our communities, our mission is to serve all independent dealers in our great State of Montana.

Chad Randash

President

Maximize the Benefits of Reinsurance

This is the first of a four-part look by Buckeye Dealership Consulting’s CEO Rob Fox regarding the ways independent automobile dealers and finance companies can maximize the benefits and profit opportunities that come from establishing their own reinsurance company.

PART I: What is Reinsurance?

Whether you’re a retail or buy here, pay here dealer, there are benefits that come with having a robust F&I department. Whether it’s that service contract or GAP waiver you’re selling, the warranty you’re offering, or the collateral protection insurance you may be placing, your F&I office can provide customers with voluntary protection products that will benefit them in time of need.

Dealers frequently work with insurance companies that enter into contracts with your customers when offering these products. The customer will pay a premium to the company, often financed in the retail installment sales contract, and the premium is remitted to the carrier who assumes all the risk – but retains all the profits. If a customer needs to file a claim, the insurance carrier or their administrator handles all claim-processing responsibilities.

Other programs, referred to as “retro programs,” are similar. You sell the product, get a commission, remit the premium to the insurance company and, once the premium has been fully earned, you may get some small profit share.

Reinsurance transfers the risk from the “big” insurance carrier to you. How? As a dealer, you can create your own insurance company. The reinsurance company then engages a management company to create a customizable program, set up the corporation, administer the claims, provide accounting services and prepare tax returns. The management company will also train your staff and monitor your programs.

So, when you sell that service contract for let’s say $1,299, you don’t send the $1,299 off to an unaffiliated third-party. Because you’re the reinsurer, that money ends up in your hands – minus small administrative expenses and ceding fees.

How Utilizing A Floorplan Can Elevate Your Dealership

There are many reasons why independent dealers may prefer to use cash instead of a floorplan.

Whether it’s the way you’ve always done business or because you had bad experiences with banks or other lenders in the past, it’s understandable why you may be apprehensive to switch to a floorplan provider.

However, there are some of the reasons why independent dealers should consider opening a floorplan line of credit:

Straightforward Terms and Fees

When you operate on a cash-only basis, you feel comfortable knowing that your money comes with no hidden fees or confusing terms that will slowly start to eat away at your funds.

Choose a lender based on transparency, whether it’s terms, conditions, or floorplan options. Make sure your lender is upfront and straightforward about additional fees and terms.

More Inventory Flexibility

When market changes affect inventory availability and pricing, your options may be limited when it comes to sourcing new inventory. The additional cash flow floorplanning provides will give you more flexibility so you can make changes to your inventory or invest in new sales strategies to sell your inventory quickly. You’ll no longer have to wait for car buyers to show up to your lot to make a sale.

A Supportive Ally

When you visit your local bank, the staff may not remember your name and may view you as just another customer. The lender you choose should value your partnership and are invested in helping your business be successful.

Your dedicated floorplan account rep will be able to provide you with industry insights and help you figure out how to tackle any roadblocks you encounter. They’ll also explain the additional tools and resources available to you as part of your floorplan, so your business will continue to thrive during challenging times.

While cash may seem like the most straightforward option for funding your dealership, floorplans will offer you more options and open the door to new possibilities.

Sponsored by Buckeye Dealership Consulting, Kinetic Advantage, & Passtime