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Automotive Dealership Coronavirus Alert

March 17, 2020
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The Coronavirus pandemic has impacted both our personal lives and the economy. The near future will be difficult. Citrin Cooperman will be providing you with summaries of federal and state tax and business advisory updates through our email alerts, website, and social media. For items specific to automobile dealerships, please review the regular updates issued by your state and regional dealership associations, as well as our SPARKS updates. From a business prospective, the following are a dozen points to think about.

  1. Cash. Preserve cash. In uncertain times, keep spending to a minimum.

  2. Staff. Minimize exposure to your staff by having teams work different shifts. If you have a centralized accounting or business development center (BDC) office, consider assigning staff to different office locations.

  3. Contracts in Transit (CIT). Monitor CITs. Following up on all outstanding CITs.

  4. F&I Department. Stay vigilant as to the practice of the F&I department. Sales and credit practices must remain compliant with regulatory and fair consumer practices. During difficult sales times, it can be easy to stray away from best practices and expose the dealership and the dealers to significant consumer retail bank debt exposure, lawsuits, and government intervention.

  5. Accounts Receivable. Stay vigilant with collections. Especially wholesale parts. Tighten credit availability and increase COD sales.

  6. Inventory. Monitor inventory levels. Maintain the appropriate levels needed given the anticipated decrease in sales. Make sure you are approving all new vehicle inventory shipments from the manufacturer.

  7. Used Vehicles. Tighten policies around used vehicle inventory levels. Monitor trade in values and aged inventory.

  8. Fixed Ops. Fixed operations (parts and service) typically increase during a recession, while vehicle sales tend to decrease as credit tightens. Fixed ops need to be closely managed. Tech utilization needs to be monitored. Concentrate on warranty and customer pay ROs. Avoid unnecessary internal ROs. Flexing tech hours may be a challenge due to union contract compliance.

  9. Large Purchases. Hold off on any significant fixed asset purchases or image improvements required of the manufacturer.

  10. Vendor Payments. Extending payment terms with your vendors. Need to be careful since vendors are probably tightening credit. Determine if the manufacturer will extend payments terms on the parts statement balances.

  11. Expenses. Reduce variable expenses, advertising, non-essential repairs, etc.

  12. BDC. Consider adding resources to your BDC. Physical ups may be down but virtual ups may increase as individual stay home. Reassign floor sales persons to BDC to assist. Add direct delivery service.

During these difficult times reach out to the Citrin Cooperman Automotive Dealership Practice team, we are ready to assist you and your business.

Be Safe. Stay Healthy.