Dealer Profits

Dealer Aftermarket Products

There are many ways to supplement the income of your dealership. You can offer a large variety of dealer aftermarket products that will benefit your customers. After you come to an agreed selling price your work has just begun. You can benefit your customer by offering your customers dealer warranties, upholstery protection, rust protection, vehicle delivery, and many other dealer aftermarket products, many of which will add additional value to your customer’s vehicle after the purchase.

Dealer Warranties

Offering dealer warranties give your customer’s additional piece of mine knowing they won’t face unexpected repair bills. Many companies can offer outside mechanical warranties on the vehicles you sell. If you sell outside mechanical warranties, all warranty work will take place at a repair shop “outside” at another location.

You can also offer in-house warranties. If a customer buys an in-house warranty, the customer can bring the vehicle back to your dealership to have repairs done at your repair shop. Dealer warranties can provide an additional profit while protecting your customer’s investment in the vehicle. Be sure your dealer warranty states clearly what type of mechanical issues are covered. Most dealers only sell warranties on vehicles that are less than five years old.
You can find a list of dealer warranty providers by clicking here or go to Google, Yahoo, or Bing and type in “Dealer Warranties” for an updated list of dealer warranty providers.

Upholstery Protection

You can also ad value to your customer's vehicle by providing upholstery protection on vehicles you sell. After the sale, before the customer takes possession of the vehicle, just take it into your service garage and spray a commercial upholstery protection chemical. Upholstery protection provided to your customer protects your customer’s interior, adds value to the vehicle, and can ad to your bottom line.

Rust Protection

Rust protection, like upholstery protection can be an excellent service to offer your customers. You can purchase a commercial rust protection chemical designed just for dealers that you can spray on the frame of the vehicle to prevent future rust. Rust protection is a great selling tool to your customer since it will add to the vehicle value if your customer decides to resell the vehicle. Be sure to disclose all fees in writing to your customer before the sale to make sure they are aware of all aftermarket charges.

Vehicle Preparation Fees

Many dealers include dealer preparation fees on the invoice. Sometimes it takes a signifigant amount of money to  in making sure your vehicles are in top mechanical and cosmetic condition before the sale. You may be able to charge the customer for the basic cleaning and repairs that it cost you to prepare the vehicle for sale. Be sure to disclose all charges thoroughly to your customer and be sure to contact your state dealer license bureau to make sure vehicle preparation fees are allowed in your state.

Deciding If You Should Market Aftermarket Products

It is your choice whether or not to offer aftermarket products. You will always have several costs associated with your dealership such as your lot lease, your dealer license fees, your dealer insurance, your dealer bond, the finance charges for your inventory loan, vehicle repairs, vehicle fuel, auction charges, sales person commissions, and so on. By offering aftermarket products, you are offering your customers a beneficial service that may add to the value of the vehicle.

Be sure to disclose all aftermarket product fees to your customer completely in writing.

Buying Vehicles with Lost or Stolen Titles

Most states have an easy step by step process that will allow you to purchase a vehicle without a title. Certain states make it very easy to buy a vehicle without a title but other states make it very, very difficult to obtain a new title. Many states use a special form called a Secure Power of Attorney that can be used to order a new title. Your new title will replace the title that was lost or stolen. You can actually have the new title made out in your dealership’s name and have the title delivered directly to your dealership.

Secure Power of Attorney forms are a great way for your dealership to purchase a vehicle from someone that has lost the title. Always be very careful when buying a vehicle without a title. The first thing you should do is record the Vehicle Identification Number off of the frame of the vehicle then call your state dealer license bureau and do a VIN look up. This will insure you that the person trying to sell you the vehicle is the last rightful owner. It also assures the vehicle is not stolen and has no liens. If the vehicle is stolen, the original owner is legally entitled to take possession of the car and will not be required to reimburse you one single penny. The person who sold you the vehicle would then go to jail for selling a stolen vehicle and you would lose the money you paid for the vehicle. You could also be responsible for any liens or back taxes on a vehicle purchased with lost title so be sure to do a proper VIN lookup before purchasing any vehicle without a title.

Here is an example of a VIN lookup. Let’s say Farmer John has a 57 Chevy in the barn he wants to sell but he lost the title several years ago. The first thing you want to do is meet with Farmer John and obtain the Vehicle Identification Number, or VIN, directly from the 57 Chevy. You must then use the VIN to do a lien lookup. Your state should be able to give you a specific telephone number for lien lookups, or many states allow you to look up liens directly on their website once you obtain our security access code number. The reason you must look up the lien information is to make sure Farmer John is the last person’s name to appear on the title information. If Farmer John is the person trying to sell you the 57 Chevy and the name on the lien lookup is Jack Smith, Farmer John is trying to sell you a vehicle he does not rightfully own. Back away from the deal.

You may only purchase a vehicle from someone that has the legal selling rights to the vehicle.

The legal seller’s name will appear on the front of the title or, if you are dealing with a lost title it will be the last name registered on a lien lookup. By doing a lien lookup you are also making sure Farmer John does not owe a substantial amount of money on the vehicle. And last, but definitely not least, by doing a lien lookup you are making sure Farmer John did not steal the vehicle.

I cannot stress the importance of doing a lien lookup on every transaction with a lost title. No matter how honest the person selling the vehicle seems, you must protect yourself at all times. If you purchase a vehicle that was stolen, a law enforcement agent could arrest the person that stole the vehicle, take the vehicle from you and deliver back to its rightful owner. Then you have lost the entire amount that you paid for the vehicle. Many dealers are in the habit of buying ATVs without requiring the seller to provide a title at the time of the sale. Unfortunately, this is a very common occurrence that must always be avoided. A few years ago several dealers that were victims of an ATV theft ring. Several ATVs were stolen in California then shipped to states throughout the Midwest. The ATV thieves marketed several hundred of these stolen ATVs to dealers at substantial discounts because they did not have the titles. When the California Highway Patrol traced the ATVs to the Midwest, it wasn’t long before each and every one of these stolen ATVs were located. The California Highway Patrol confiscated these ATVs then shipped them back to the rightful owners in California. The persons that stole the ATVs were all arrested and sent to prison. The dealers that purchased the ATVs without titles were out of substantial amounts of money with no legal recourse. There was no way to regain their investment from the sellers who were now in a California prison.

If you cannot locate any type of lien information on a vehicle someone wants to sell you, step away from the vehicle.

Searching for owners of vehicles with lost titles can be a great way to ad vehicles to your inventory.  I have ran advertisements in my local newspapers that I will buy
vehicle without titles. There are tons of people that have an old car, truck or motorcycle in there barn just sitting because of a lost title. Check the laws of your state before purchasing a vehicle without a title to make sure you properly follow all legal guidelines. There are thousands of vehicle without titles that are just waiting for you.

Temporary Permits (30 Day Tags)

Most states allow dealers to sell “Temporary Permits” or “30 Day Tags”. I am sure you have seen these temporary permits. Some states require them to be placed in the top left of the back window while other states require them to be placed in a license plate frame mounted where the license plates normally resides. A temporary permit allows your customer to drive the vehicle they have purchased from your dealership for 30 days which allows them to save up to pay sales tax so they can properly license the vehicle.

Most states have very strict requirements regarding the issuance of a temporary permit. You may usually place temporary permits only on vehicles that have been sold by your dealership. Most states never allow a dealer to sell or give away unused temporary permits to other dealers. They require the dealer that initially purchased the temporary permit to use them. You will also be held accountable for each temporary permit you sell. If you sell ten temporary permits and only five cars your state dealer license bureau will note the discrepancy which could lead to your dealership no longer being allowed to sell the permits. You may be required to have the vehicle pass a state safety inspection before you place a temporary permit on the vehicle. Most states require a customer to show proof of insurance before a dealer is allowed to place a temporary permit on a vehicle.

Temporary permits are usually available from your state dealer license bureau. They are often sold in a package of ten for $7.50 apiece plus $3.50 shipping and handling. Dealer license bureaus normally allow dealers to sell the temporary permits for up to $7.50 but not a penny more, since you are not allowed to make a profit on them.

When completing a temporary permit to place on a vehicle sold by your dealership you are normally required to use a black felt mark and enter the date thirty days from the sale. For example, if you sell a vehicle on August 5, 2010, you would enter an expiration date of AUG/05/10. Most temporary permits also have months and days listed so you can also use a punch to make a hole on the corresponding dates. This prevents your customer from using their own felt market to alter and extend the expiration date you have entered. You will also need to fill out the back of the temporary permit completely with all required information. Most temporary permits have a tear off tag that you will be required to complete then keep in your files for three to five years.

Each temporary permit usually has an individual temporary permit number. The temporary permit numbers in the temporary permit book sent by your dealer license bureau are normally listed in a certain succession, such as HBZ-38H, then HBZ-39H, then HBZ-40H. The numbers of the permit book you are issued will be recorded with your state dealer license bureau. If a law enforcement officer pulls over a person driving with a temporary permit that you have sold, they will know that temporary permit was sold by your dealership. Most state dealer license bureaus required dealers to record the temporary permit number for each temporary permit sold on their monthly sales reports.

Off Site Shows and Sales

Most dealer license bureaus throughout the country require a dealer’s sales activity to take place only at their licensed location. Most states do not allow a dealer to sell a vehicle, or “Curb” a vehicle for sale at a non licensed location unless you are participating in an off-site show or off-site sale.

We have all seen the big dealer tent sale at a mall or other large parking lot. These events are called “off site sales”. The dealers are participating in an off-site sale staffed by salespeople with selling activity taking place. Most dealer license bureaus allow a dealer to participate in two or more off-site sales a year. The off-site shows are usually limited to certain vehicle types. The off-site show categories may be for new car dealers, used car dealers, RV dealers, boat dealer, motorcycle dealers, etc. State dealer license bureaus usually require that you only participate in an off-site sale in your specific vehicle category and the sale must not last more than 3 to 5 days. Most state dealer license bureaus also require the off-site show to be officially registered and sanctioned by the state. Dealers that participate in an unregistered off-site show can face hefty state fines.

Be sure to consult with your state dealer license bureau before participating in an off-site sale.

Your state dealer license bureau may also allow you to participate in what is called an “off-site show”. An off-site show is different than an off-site sale because no selling activity is taking place. You might see a vehicle in the middle of a mall with no sales people around. The dealer that owns this vehicle is showing it “off-site”. No sales activity is taking place at an off-site show, the vehicle is being shown for display purposes only. It will usually have a sticker in the window that shows options, price, and dealer contact information. States also have very strict requirements regarding off-site shows.

Before you move any vehicles to another location for any type of sales or show activity, it is imperative that you contact your state dealer license bureau to make sure you are complying with all off-site sale and off-site show regulations.

Vehicle Consignments

A very large part of many dealers businesses are vehicle consignments. A consignment is the process of placing a customer’s vehicle on your lot and selling it to another customer. Most states allow you to consign the ownership of a customer’s vehicle to another customer but most states strictly forbid dealers to consign other dealer’s vehicles. Dealer to dealer consignments are prohibited in several states. Almost every state requires dealers selling activity to take place at their own licensed location, never at another dealer’s location.
Before you place a customer’s vehicle on your lot you will normally need to have the customer sign a form that states you have permission to sell the vehicle. Most states require some type of proof of ownership or permission to sell each vehicle on their lot. By requiring your customer to give written permission to sell the vehicle you will be able to provide this documentation if your dealership undergoes a records inspection.

During a consignment sale you have to have what I call a meeting of the minds. Let’s say you place John Doe’s car for sale on your lot. Sally Smith test drives the car and decides to purchase it. You are normally not allowed to keep John Doe’s title in your possession before the sale because the purchaser’s information is not completed which would make the title an illegal blank title. You must have John Doe bring the title to your dealership at the time of the sale, sign it over to you, and then reassign it to Sally Smith. This is the correct consignment procedure in most states but be sure to check with your state dealer license bureau to find out legal consignment instructions.

It can sometimes be quite inconvenient to handle consignments and most dealers avoid consignments altogether, although some dealers do thrive on consignments. If a customer asks me to consign a vehicle I always ask the customer how much they want for the vehicle and then I sometimes purchase the vehicle directly from the customer. This allows me to take the title at the time of the transaction and then resell it to the next customer. In many cases purchasing your customer’s vehicle for resell is much easier than handling a consignment sale.

Before every considering a vehicle consignment it is very important that you contact your dealer insurance provider to verify that consignments are covered under your dealer garage policy. Many dealer insurance providers require an extra policy rider that will cover vehicle consignments. Make sure you are insured correctly before ever allowing a customer to test drive a consignment.

Be sure to contact your state dealer license bureau to find out your state’s regulations regarding vehicle consignments.

Trade In Credits

Most often when you think of a trade in, you think of some type of motor vehicle being taken on the trade. Every state allows you to take vehicles as a trade in but many states also allow you to take personal property as a trade as well. Your state may allow you to take guns, watches, television sets or any other type of personal property as a trade in for vehicles. Before you take any personal property as a trade, be sure to check with your state dealer license bureau to find out exactly what type of trades are allowed.

Many states also allow you to take agricultural items as a trade. You may be allowed to take corn, grain, or even cattle or horses as a trade for you vehicles. Most states that do allow agricultural products as trade ins would like to see the agricultural trades for agricultural type vehicles such as combines, tractors, ATVs, or four wheel drive trucks. Once again, be sure to contact your state dealer license bureau to see what type of trade ins are allowed in your state.

I have spoke many with dealers that gladly accept personal property trades and have acquired large collections of certain types of personal property. A dealer I spoke with in Missouri takes Rolex watches as trades and has now acquired a large collection of Rolex watches. Another dealer has been taking guns on trade for over 30 years and is now the owner of a huge, priceless gun collection.

If your state does allow you to accept personal property as a trade, you must always report the true value of the trade. You can never inflate the value of a trade to assist the customer in paying a lesser amount of taxes when licensing the vehicle. For example, you may never report that a $500 television set is worth a $5000 trade in allowance. When you are reporting a trade in of personal property most states want the trade in, along with the amount allowed for the trade in, to be reported on your state title application. You can usually obtain your state title application at your local license office or call your state dealer license bureau to learn more about accepting personal property as a trade in.

Be sure to consult with your state dealer license bureau to find out what type of trades allowed in your state and always to sure to record the correct value of the trade, never inflate the value.

Donating Motor Vehicles

I believe owning a dealership is absolutely the world’s greatest business. When you obtain your dealer license you can sell just a few vehicles a year or you can sell several thousand vehicles a year.

When you become an established dealer and gain some experience your profits will begin to climb. After you learn the ropes of this business you may easily bump yourself up into a higher tax bracket. When your profits increase you may find yourself trying to obtain every tax break that you can, including seeking every possible tax deduction that is possible.

The vehicles on your lot can be your greatest tax deduction. The tax benefits of donating motor vehicles to charity often outweighed the financial gain obtained when selling a vehicle.
The old clunker that has sat unsold on your lot for the last year can be donated to a charity leading to a tax deduction from Uncle Sam. There are basically two ways you can obtain a legitimate tax deduction when you donate a vehicle.

If you donate a vehicle to a charity and the charity licenses and uses the vehicle on a daily basis, the IRS usually allows the Blue Book high retail value as your deduction. For example, let’s say you donate a truck to the Salvation Army. The Salvation Army then licenses and uses the truck for day to day operations. You would be allowed the Blue Book high retail price of the vehicle as your tax deductable amount. The last time I checked, Blue Book high retail is much higher than what most vehicles sell for. If a charity licenses the vehicle you donate you gain the biggest tax deduction. But most charities take the vehicle you have donated and sell as soon it while keeping the sales amount. For example, if you donate a truck to the Salvation Army, the Salvation Army may sell the vehicle for $1000. If they sell the vehicle for $1,000 they will mail you a form that states the vehicle was sold for $1,000 thereby allowing you a $1,000 tax deduction. Most vehicles you donate will be sold immediately instead of being licensed.

There are hundreds, maybe even thousands of companies across the country that want your vehicle donations.  Before donating a vehicle to any company, make sure they are a legitimate charity that can show you a copy of their federal tax exemption certificate. Many states require dealers to sell a minimum amount of vehicles every year in order to keep their dealer license. Most states do not allow a vehicle donation to count as an official sale. Donating several vehicles in December will not assist you in obtaining your states minimum sales requirements.

Ohio Dealer Licensing

The IRS laws regarding motor vehicle donations change quite often so be sure to talk with an attorney, an accountant, or a tax professional before taking motor vehicle donations as a tax deduction.