The Car and Truck Fleet and Leasing Management Magazine

The 'Courtesy Delivery' Case

November 1975, by Staff

It has been suggested that courtesy delivery is an out­growth of vacationers' picking up their new cars in De­troit to save the shipping costs. This then evolved into a situation where branch transfers were arranged so that a dealer in one community could ship a car to his father or another relative, thru a brother dealer in another community. A true courtesy delivery.

I was later advised that courtesy deliveries really got under way as we know them today when the manufacturers first included the hold-back in the invoice. This suggested to a couple of the national leasing companies a way in which they might reduce their acquisition costs if they could influence dealers to give up a part of this hold-back.

Is courtesy delivery the answer? I have approached men within the industry and I have asked them this question. Of those that responded, I have selected four answers to report to you. Two on either side of the issue. All of the men being quoted are dealer-oriented national fleet managers.

PRO

Response 1

In response to your inquiry on courtesy delivery, may I point out that our company looks upon it quite favor­ably. I am in touch with quite a number of leasing com­panies that drop-ship cars to us for courtesy delivery. It is obvious that many of the drop-shipments originate from leasing companies which are served by or allied with an automobile dealership. We find that as long as the leasing companies give us good directional informa­tion, and as long as they pay us promptly, we can live with minimum payments made for these courtesy deliveries. We find that it has many advantages for the dealer-asso­ciated leasing companies. First, it represents the sale on the part of the dealership. Second, the leasing company is assured that the unit is ordered exactly as specified. Third, if the courtesy delivering dealer is conscientious, then the leasing company's customer is handled and treated properly from the beginning. Additionally, the courtesy delivering dealer is quite familiar with the tax laws, the licensing requirements, etc., and can readily, easily, and simply handle these details for the leasing companies, usually to the unexpected delight of the receiving customer. It is most important that the correct and proper paperwork is forwarded to the courtesy de­livering dealer, particularly the information about licensing, the power of attorney and a bill of sale so that the sales taxes may be added.

Response 2

When speaking of drop-shipping, there are two partici­pants to be considered. The first is the selling dealer. Since this is a disposition, it would create the follow­ing: 1) Larger volume for factory quotas, incentives and contests; 2) Continuous flow of orders from each client with limited sales expense once the account has been established; 3) Payment from each reliable blue-chip source whose credit has been thoroughly checked prior to committment; 4) Ease of handling paperwork from each source, once your people become familiar with their purchase orders and system. In addition, your client becomes familiar with your people and procedures, further creating a smoother flow of communication; 5) Dealing in volume creates excellent profit.

Response 1

Problem - courtesy delivery. Ideally, this is a great concept. I've used it in leasing. However, I am afraid that if this system, as practiced today, is not corrected, the program will fail.

Specifically, leasing companies are a problem. I say this because they have been the biggest offenders in shoving their orders thru one dealer and paying the going rate, whatever it might be. Our factory has seen fit to drop the load on the dealers' shoulders and is definitely suggesting that we conform and let delivery dealers have the service card over and above the charge made for the automobile over the invoice.

The courts are now scheduling cases to find out where the culpability lies for maintenance and service preparation with a new car. The dealer who has the service card disclaims responsibility for an inadequate service job because he has given the money to the lease company. One big trial, with a judgement of a million or better, should bring out the fact that such an award can destroy a dealership. I believe the factory should police this procedure in a mili­tant manner, because in this age of commercialism we can not afford to bargain away a good incentive for all of us.

Another major problem is the failure to advise a courtesy delivering dealer of an order status. In other words, if I am receiving a car (courtesy route) from a dealer in Chicago, I have no status report as to where it's being built etc., and it creates trouble for the driver at the local level. The factories have had their problems too, meaning lack of orders, and this has caused shifting of the orders to dif­ferent plants. Somebody should inform us and we could reassure of a lot of unhappy people.

Response 2

THERE MUST BE SOMETHING . . . ANYTHING? nice to say about courtesy delivery. If there is, and I doubt it, I can't think of it.

Whoever was the first to think of it must have had a night­mare at the time. However, I wish I could think of a way to get a bunch of stupid dealers and fleet men to do all of the work, while I would get most of the pay.

The delivering dealer should look at the following before he turns down a courtesy delivery offer: 1) The profit from a courtesy delivery is certainly better than no profit at all. In many cases the net dollars on a courtesy delivery are greater than the net on the sale of a unit at a marginal profit. Often the payment from a selling dealer, a courtesy delivery fee, comes up front; 2) Service units return to the dealership, thus adding profits to both the service and parts departments 3) Through courtesy delivery, the dealer can experience a profit without going thru the sales expense, telephoning expense and accounting expense while waiting for the two-percent hold-back, etc. This does not mean that there will not be any problem collecting what is due from the selling dealer. It is up to each individual to make sure that he is dealing with a reputable dealer, experienced in the functions of this type of program.

- IN SUMMATION -

Fact or fiction, you be the judge: 1} Courtesy deliveries are good for both the selling dealers and the delivering dealers. It reflects an equal distribution of benefits and profits to both. 2) The delivering dealer who has not re­ceived the factory allocated preparation and service charge can well afford to offer exactly the same after-delivery-service as though he had received it. 3) Flooding a market or state with courtesy deliveries from outside the market area might very well jeopardize the delivering dealer's relationship with his factory. He no longer properly reflects the penetration of district average (that is his product vs. competitive products). He loses a sales credit, his performance record will suffer. Sufficient loss of sales credit could result in eventual termination as dealer by factory.

The question remains, is courtesy delivery the answer? Or have we not opened Pandora's box?

 

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