Chris CollinsHelping Struggling Dealerships Build Profitable, High-Performing Service Departments | Automotive Coaching Expert | CEO

The Benefit of Fixed Absorption

8 Jun 2023 · 1 min

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A short spoken presentation by Chris Collins on strategies for dealership profitability focused on fixed operations (parts & service). He argues that very high fixed-ops margins (example: ~40% net-to-gross in parts & service) allow independent dealers to influence local markets even when competing against large groups (AutoNation, Lithia) that prioritize market share over per-unit profit. Collins gives numeric examples (per-copy gross differences) to illustrate tactical advantages.

Chapters

If your fixed ops is really, really profitable, like, let's say, you know, 40% net to gross in parts and service. Right. And you're putting serious money to the bottom line. And now you're in a marketplace where you're competing against an autonation in a Lithia. They're paying their general managers on market share. They aren't so concerned with gross or profits, and they're giving cars away in the marketplace or doing it in a different way. You can. You can step on the pedal and affect the market, demoralize your competition and have a system on the back end that your grosses are actually higher. So we would be 5 or $600 higher per copy than everybody else. They perceived that we were lower.