Auto Dealer Monthly, June 2017

10 auto dealer today June 2017 O n t h e P o i n t PHOTO COURTESY GOV ANDREW M CUOMO principle applies when these people start telling us about the safety of the new autonomous cars Here we are marching around outside of Jericho blowing our little plastic horns and you can already see the walls starting to shake One sure sign of the car business apocalypse is a disturbing report from Bloomberg that loan fraud is running rampant Lenders are already writing off more than 6 billion in bogus loans annually Its called powerbooking misrepresenting the customers income or misstating the equipment on the credit application More than 1 of all car loans today originated from bogus fraudulent and doctored applications Thats more than what crashed the mortgage industry in 2008 Im going to go there now Some of you are about to get upset with what I am about to write here Its not the customers fault You read that right Its not your customers who are falsifying these credit applications Its your salespeople and managers Regardless of exposure and the fact that it is now a federal crime it has become epidemic in dealerships everywhere I am seeing some dealerships routinely jack up the credit apps to get deals past the lenders and approved Im talking about adding income they dont make and jobs they dont really have Putting bogus information on a credit application has become a sophisticated art form in too many dealerships We have people who are experts in serving up misinformation to the banks and finance companies in a form that will actually get by their credit checks The pressure on the sales department is so high and todays customers are so stretched that fraudulent applications are approaching critical mass Fake News Alert The headline said 70 of AutoNation sales associates opted for the new millennial friendly pay plan Now we have our own automotive version of fake news I asked around and several of my friends gave me my own copy Its a combination of tenure on the job rewards service contract spiffs CSI spiffs a base salary and an escalating series of mini deal rewards per unit sale Having studied it carefully I have come to the opinion that this pay plan really really sucks First of all the copy I have is for a highline AutoNation dealership I do not know if they have the same plan for every dealership or region It starts out with a base salary that resembles minimum wage Then the mini deals kick in starting at 100 per unit sold for the first nine units It escalates per unit in 50 increments up to 500 a unit on the 25th car sold People who have been with the dealership five years or more get an additional 50 a car and there is another 50 a car if they get a service contract on that unit They can also receive another 50 if the customer returns an elite CSI report So lets do the math A salesperson who sells 15 units a month on this pay plan will earn 2100 plus minimum wage If they have been on the job for five years and if they sell the service contract and luck their way into a sparkling CSI survey on every single unit they will make somewhere around 4200 Anyone posting 15 units a month would earn somewhere around 10000 in most normal dealerships with normal pay plans Of course most car salespeople average closer to eight units a month But exceptional salespeople will settle for nothing less than 25 How would they fare under AutoNations new plan I ran the math out and I tried to be fair giving the benefit to the AutoNation plan every time I was unsure It appears to me that if a salesperson with more than five years on the job had a 25 unit month they would make by my estimates including minimum wage and all bonuses 11097 I can tell you from experience that first of all maybe one out of 100 is going to hit that level Secondly 25 units hitting all bonus levels in most normal dealerships would pay somewhere north of 20000 in most cases on most pay plans In my opinion this pay plan is a big stinking pile of poo The article I read presented it as if it was something that made the millennials ecstatic because it had a lot of great time off in the schedule If 70 of the employees chose this plan over traditional commissions so they could get time off I shudder to envision the quality of the sales force That Did Suck OK lets be clear before you read this I dont like Carvana I dont like the company I dont like the concept I dont like the people I dont like their ancestors I dont like their neighbors I dont even like their pets Their entire business model is based on bashing car people and telling consumers how we suck Their words not mine They set up this goofy vending machine concept and they run commercials with a cast of dancing morons strutting around like idiots and singing That didnt suck Their mission is to bash dealers and car people The misguided Carvana business model is aimed at In May New York Gov Andrew Cuomo center announced the state would begin accepting applications from companies wishing to test self driving cars on public roads The author says political support for autonomous technology could ultimately lead to a ban on manually operated vehicles