Ed Bobit's Publisher's Page

I am tempted . . . really tempted.

Learning about the recent deal cut by a major daily rental company with a dealer and the blessing of the factory to sell cars to all company-owned and franchised outlets for five dollars over net-net set me to thinking.

First of all, I studied the nitty-gritty cost structure and, if my arithmetic is even close to being correct, it goes like this:

Invoice on the typical intermediate-A-Body car (includes A/C, tinted glass, disc brakes, automatic transmission, radials, bumper guards, body striping, side moldings, V6 engine, power steering, AM radio). . . . . . . . . . . . $5,600

Translated, this is a basic $3,900 car with options of $1,175, hold-back of $125, $40 for advertising, $360 for freight plus some odds and ends. Now, if we deduct the hold-back ($125) and advertising ($40) and the service card

(about $35), . . . . . . . . . . . . . . . . . . . . - 200

we really have . . . . . . . . . . . . . . . . . . 5,400

Now, take care of the dealer . . . . . . .           5

Total capitalized cost to the daily rental company . . . . . . . . . . . . . . . . . .  $5,405

(It is also just about the net-net cost to any dealer.)

Up to this point, it looks beautiful, if all the other fac­tors are just right. As the story goes, the cars can be drop-shipped into the rental company's "depot" for servicing; and that is ideal as it surely would cost the rental company (hereafter known as the "buyer") another $75 for off-premises (local car dealer) prepping. An additional factor is whether there is immediate payment for the merchandise; any single day under finance charges will cost that ordering dealer about $1.05 per day. But factory financing assistance has been assured to all qualified franchises. So, no worry there.

A most important factor that makes it either attractive or a bummer is whether you "make" five dollars per car or $55 per car; i.e. the use of a special route and delivering dealer that qualifies for the extra $50 Distant Delivery allowance from the factory. (My personal inquiry to both purchaser and purchasee was left unanswered as to Distant Delivery payments, if they were earned, or if shared or rebated.) And that is the key as to what my happen to purchases in the future.

The simple fact of life is that even with volume (and who is not going to take advantage of purchasing at five dollars over net-net? - and no need to be concerned with the residual as there is an adjoining plan to guarantee it measures up to competition for resale dollars when you dispose of it), a dealer who has his own clerical help enter­ing the orders directly with the factory (as in this case), plus a share of overhead, may still have a difficult time equating the five dollars per car. After all, there has to be some secretary or fleet sales manager to open the mail (invoice copies and check payments), go to the bank and take the buyer to lunch on some occasion.

On the other hand, if the buyer is doing all the "work" and is double-cycling the cars during the year, and do pay promptly, and does purchase 20,000 cars (at five dollars per car), it is undoubtedly $100,000 that the dealership would not have had. And there are real bonuses that accrue to the dealership for going "over quota" such as trips to the Orient, etc.

It is at this point that temptation emerges. Why not set up the Bobit Buying Business? Just think, if I could per­suade Hertz and PHH to purchase for five dollars over net-net, let someone else worry about the prepping and war­ranty and servicing, get prompt payment, and sell . . . oh, let's say 150,000 cars each year . . .

As a matter of fact, why not actually go to some expense and put in an 800 toll-free number so that the public could avail itself of this sensational purchasing opportunity? Who cares what it does to the franchise system that has served us so well for generations? Who cares what it does to the dealer in Shelbyville, Indiana who thought he could care less about fleet business? Who cares that if and when 50-percent of all car sales are centered in the fleet and leasing business, it might be possible that a handful of dealers control that 50-percent of registrations? Who cares if any buyer is wise enough to purchase at relatively the same net-net as the dealer himself who has hundreds of thousands invested in his business and is dedicated to his factory source? Who cares if our market becomes a whore business.

Well, I, for one, care . . .

Then again, with the buying service, I just might be tempt­ed to do the same thing for four dollars over net-net . . .