For those who don’t know, PAC is a reserve that some dealers take off the margin of new and used vehicle sales. Often times it’s represented as the money needed to cover advertising and other business expenses. Other dealers just use PAC to reduce the gross profit on sales, thus reducing commissions.
Why don’t I like PAC? In my discussions with dealers, I find that most of them implemented a PAC when their sales pay plans got to be too rich. Instead of adjusting the pay plans, they reigned them in by reducing the front side profit of the vehicle sale.
As I get to see the financials for hundreds of dealers, PAC or no PAC, I find that most end up paying about the same amount to their sales staff. What I do see with dealers who use a heavy PAC is that there are unintended consequences that arise.
– Inventory aging as the sales staff don’t want to sell vehicles they can’t make good money on.
– Animosity when sales staff feel like the dealership is hiding things.
– Disenfranchised sales staff who were lured to work for a dealership with high commission rates, only to find that the high rate was on a small number.
The current pandemic offers many dealers a chance to reset. Are you using your time wisely?
https://www.linkedin.com/posts/markjsheffield_dealers-marine-rv-activity-6665238501241483264-nKv-
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