Office in a Car Dealership

[JCK818]

I need you opinions please.

I have an offer to set up shop at a local dealership. No cost on my end ( just the pc i'm going to use). He wants 50% of what i make. He guarantees to send about 80-90 clients my way a month. My issue is, it sounds too good to be true. I'm thinking I close 50%?
Currently he refers it out and according to him majority of them do get insurance.
Anyone have experience in doing business in a dealership? Anything i'm missing here? Any idea what the closing rate might be or the cancellation ratio?

 

[Josh]

That is a RIDICULOUS cut, even if it was just on the first 6 months or FYC. Even 25% would seem a bit much. Does he have a license for the split?

Would he be willing to try it out for a month or two before making the commitment? A lot of those deals fall through, wouldn't be bad for him to let you take a "test drive" (couldn't resist).

 

[JCK818]

I can pack up and leave whenever i want. There is no commitment on my end. If it's not working out, I can leave.

 

[Josh]

Aren't you committing to giving him half the action?

 

[djs]

There are 2 problems you'll run into in this deal. If you can survive both of these, you'll do well. I will add that 50% is a bit steep, but it really isn't that unrealistic, unless its 50% for all eternity.

Problem 1: Lapses. Oh yeah, you'll get them. They needed insurance to drive the car off the lot, but many won't think they need it after the first payment is due. Fortunately, the bank will tell them otherwise (unless they are cash deals) and they will come back, at least a percentage of them. Make sure your 50% adjusts for actual income, not initial income.

Problem 2: Loss ratios. I assume these are used car deals, not new car. You'll write a lot of state minimum (or close to it) deals just to get it done. You'll be amazed at how many stolen cars / total losses you get around the 3rd or 4th month.

I used to write a LOT of this kind of business, unfortunately, the car dealers I was working with went out of business in 2008/2009 with the economy problems.

Problem 3: You'll work Friday and Saturday nights!!!!

Now, to answer your question.... you will probably have an 80% close ratio on the clients he sends you. It should not be any lower than that, if he is only sending those who need insurance. If he sends everyone, including those with insurance, your ratio will go down.

Find out how many cars a month he sells (80-90 is extremely high, but possible). Most used car lots I have dealth with are probably in the 20-40 range, with a lot of variances.

You'll need to make sure you can deal with drivers with 'impaired' driving records.

I had the same type of offer from a mortgage company once. They claimed they were doing at least 100 refi's a month and could get me the homeowners business. They wanted a 50% cut. They were unimpressed when they found out how little that was and wanted 50% of everything I wrote with that client for the life of the client. That was to much for me. They were out of business within 2 months.

Dan

 

[360]

I'd say go for it. 50% split seems fine considering dealer is providing the leads and you can always walk with your book.

 

[b61mack]

do you already have P&C contracts and P&C e&o? the commission on p&c is 10-15%. does he know that?. if you have to join a cluster 5-10% 50 cars x 100 com = 5000 a month. 1/2=2500=625 week.. work out a referal fee. which you have to eat, because you can't legally show it. also you will be paid as earned. 10.00 per car per week. 50 cars x 10.00=500 month. so the first couple of months 125.00 week... it's late but i think my math is right.. also the company will be at least 30 to 60 days behind..

 

[djs]

You'll also need to have binding authority (if you don't now). They have to walk off the lot with insurance.

Of course, you can just use progressive and put it through their POS system. May not be the cheapest, but its reasonable for what you'll need.

Dan

 

[Guest]

If you make 15% commission, sure, give him 50% but tell him you only make 10% commission!

You will be there nights, late at nights,

how will you handle chargebacks, or paid as earned business.

I have a good friend who works at a dealership, more of an upscale one, not so much a "sub-standard" one, he sends me stuff once in a while, always after 7 PM, I had asked him about hanging out at the dealership during a large sale weekend or a holiday weekend, he likes the idea and is looking into it,

I would rather spend a "Special weekend" like i mentioned rather than every weekend......cause he will want you there til 9 PM friday and saturday nights.

 

[0b1kanobee]

I would also set up a reserve account to protect myself against any chargebacks or cancels. He wants 50% then fine but a certain percentage must go into a reserve account until a certain dollar amount is in it or something to that effect. As long as you protect yourself you have nothing to lose IMO. Without a reserve account I would make it 60/40 split which he might go for if you sell it right. You are assuming all the liability for cancels or chargebacks.

I see folks complaining about the nights but that wouldn't bother me. If I have to choose 7 in the morning or 7 at night, I'll take nights. No traffic to fight and nothing happens till after work anyway before hitting the town.