Make sure you are getting the best value for your money.

By Denise L. Rondini, drondini@randallreilly.com

It would nearly impossible to run your dealership without your dealership management system. But having a DMS that does not meet your needs, or paying for features you don’t need or aren’t using, is not a smart practice. That is why Wayne Youngs, president of Wayne A. Youngs & Associates, says dealers should conduct a review of their DMS every two years.

 “They need to look at what they are paying for and whether they are using all the system’s features,” he says. “If they are not using something, they can look at lopping it off to lower the bill. They also should look at things that may have been purchased from other vendors that overlap what the DMS can do.”

Youngs explains that dealers sometimes purchase third-party applications to augment their DMS without realizing their current system has the same capability as the newly purchased item.

The system review needs to cover all aspects of the dealership. “Dealers need to look at how they do business when they are selling trucks, how their financing is set up, do they have compliance issues, etc.”

Youngs says compliance is an area of concern for him today. As states look for ways to generate additional revenue, he fears they may start looking at dealerships to ensure they are in compliance with all regulations.

He advises dealers to conduct system reviews at all their locations. “If a dealer has five locations, he has to decide if he wants all the processes to be the same at those five locations or if he wants the locations to have more autonomy,” he says. A dealer may think every location is using the same procedures, but unless he gets in there and does a review he may not be sure.

During one recent review, Youngs was able to find $4,000 in savings for a dealer. “That might not sound like a lot of money, but on a 60-month contract (which is typical for a DMS) that is $240,000,” he says.

 At the end of the review if the dealer discovers his system is not right for his operation he needs to start analyzing other systems.

 While Youngs believes dealers can conduct this analysis themselves, they may want to consider hiring a consultant to help with the process. However, if the dealer engages the services of a consultant he needs to make sure that person has knowledge of truck dealerships and dealership management systems.

 “Whether they hire a consultant or conduct the review themselves, they need to start about 13 months before their contract with their current DMS provider ends,” Youngs says. Get quotes from multiple vendors (including an upgraded system from their existing supplier) and then “break the proposals down so that you can do a side-by-side comparison,” he says. “You want to make sure you are comparing apples to apples.”

 Youngs cautions dealers that the work is not over once a decision has been made about which system seems to best fit the dealership’s needs. “Dealers tend to focus on negotiating the upfront price and the monthly costs, but they forget about the add-on items like credit checks, update tapes and additional services, etc.” he says.

 “What I find is a lot of times dealers are so relieved to finally get the end product done ― they may have been negotiating for 60 or 90 days ― that they ignore the little things at the end that end up hurting them in the long run.”

 Dealers should focus on five areas: negotiating the upfront price, negotiating the associated monthly fees, negotiating any ancillary third-party costs, making sure there are no hidden charges and making sure there are no one-time charges that will come into play down the road.

 “You want to negotiate all charges and you want to make sure your existing discounts flow through to any other purchases you make from that vendor,” Youngs says. The only way to do that is to put together a non-standard addendum that spells terms out specifically for your dealership.

 To make sure the end product best suits a dealer’s needs and is not more system than they need, Youngs encourages dealers to establish an agenda and take control of the process. “If the dealer controls the process he will only buy the things he needs and won’t get talked into buying things the vendor wants to sell him.”