Waltham Motors

An auto dealership can generate revenue via new car sales and used car sales and service. If I ran North County I would be concerned about developing a sales team that could help improve the margins in sales either through negotiation or volume. Also, good salesmen could provide good service to the customers such that they would return their for car repairs.

I think that profit on it should be granted to the used car manager because the new car manager sold the car with an allowance of $4,800, which is significantly higher than the $3,500 price in the book. While the guidebook value can vary by almost 25%, the new car salesman still provided a product allowance above this range.

I think the costs of the repairs should be added to the cost of the used car, at the wholesale price. The profits on the repairs should be calculated against the wholesale price because doesn't give the used car sales manager a perverse incentive to sell unrepaired cars or cars without profitable options for fear of hurting their margins.

The loss on the car is $1,800. I think $1,300 of the loss should be negative credit on the new car salesman, while the remaining $500 should be a negative credit for the used car salesman.

The problem is that in order to sell new cars, the salesmen are offering unrealistic trade-in-values for cars. The cars are not really worth the value, and the used salesmen suffer by having to sell the car below the trade-in-value. The used car company is subsidizing the profitability of new car sales.

I think the problem lies in the fact that the current system does not promote accountability. Instead it only gives the new sales department an incentive to sell their inventory without any concern for how it will affect the profitability of the used car sales department. An incentive scheme should be created that compensates individuals based on company-wide performance, also.