Moving the Metal

Metro Detroit has the highest lease rate of cars and trucks in the nation — a market condition that challenges dealers and automakers to move vehicles at sometimes-reduced profit margins.


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dynamic duo Mark Snethkamp Jr., general manager of Highland Park-based Snethkamp Chrysler Dodge Jeep Ram, and his sister Jennifer Bierkle, sales consultant, and their family have been selling cars since 1926.

PHOTOGRAPHY BY CJ BENNINGER

 

Metro Detroit is a market all to its own when it comes to buying and leasing vehicles. The behavior of auto consumers in the region isn’t like that of their counterparts nationwide. Here, we’re much more likely to lease than folks in California, Nebraska, or Maryland.

And the friends and family deals, the ones the automakers sometimes extend to everyone? They’re pretty ubiquitous in the metro Detroit region, given the fact that so many people have a family member or a friend who works at an auto company. When those factors are combined with some of the unique points that define the relationship between automakers and dealers, the challenge on the sales floor is to achieve consistent sales every month.

In fact, a regional dealer’s profit margin doesn’t necessarily hinge on the ability to sell cars sufficiently above invoice. FCA US (Fiat Chrysler) dealers, for example, work with what’s called the Volume Growth Program, or VGP, which incentivizes them with straight cash payouts from the manufacturer if they move a certain number of vehicles each month. Last November, certain Chrysler dealers were required to have sold or otherwise moved 131 vehicles by the middle of the month in order to receive $200 per vehicle from the manufacturer. From that point, the dealer had until the end of the month to hit a total of 379 vehicles sold or otherwise moved, which would result in another payment of $700 per vehicle.

Any dealer who could hit both marks would get cash payments totaling $900 per vehicle directly from the manufacturer. For those who fall short? The dealer gets nothing. The sale quotas vary from one month to the next, but the basic system is always the same.

So why would it make sense for OEMs to pay dealers to move cars after the dealers have already paid an invoice to take the cars in the first place? The reward for the OEM is that they can’t get dealers to order new cars until the previous ones are cleared away. That eliminates the problem of cars sitting at the factory because dealers, still looking at aging inventory, won’t order new ones until what they’ve got on hand is gone.

Ryan Roscia, president of Dick Huvaere’s Richmond Chrysler Dodge Jeep Ram SRT in Richmond (northern Macomb County), says VGP adds to existing incentives to offer cut-rate deals just to move cars. “We’ll go below our cost at times because we know that if we hit that number, we’ll get that big check,” he says.

Mark Snethkamp Jr., general manager of Highland Park-based Snethkamp Chrysler Dodge Jeep Ram, agrees. “You might even lose money on the sale just to get the metal on the road if you have a number you’re trying to hit,” he says. “In some cases, we lose quite a bit of money if we need (to move) just one or two more cars.”

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