One of the key factors in whether to stay with your existing system provider or moving to a new one is to review the price difference between staying still or making the move.
This is a complicated subject, and we understand - as a company that makes Dealer Management Systems for Car, Caravan and Motorhome dealers - that this is a very difficult part of the equation to understand.
So, we asked Simon Verona, our Founder and Managing Director for his thoughts on the subject.
Obviously, feature functionality is important, but many dealers will come to the conclusion that there are benefits to moving to another system.
However, there are costs which need to be balanced against the benefit. The key cost is the actual lifetime cost of the system moving forwards. The initial and monthly fees that you will be paying now, compared to the quotation for a prospective new system may be considering?
It is important when comparing that the true long term cost saving is taken into account when making the comparison.
Most Dealer Management System contracts will have the ability to adjust pricing throughout the contract. This is a natural feature of long term relationships and this needs to be factored in when doing your cost comparison.
It is not unusual to find that a new Dealer Management System works out slightly cheaper than an incumbent solution - maybe to the tune of 10% or more.
10% of a typical solution may not be a huge amount in itself and in itself may not justify the decision to change - at initial glance..
The above chart shows the comparison based on potential future inflation.
So, the chart was made in Nov 2022 and made with the following assumptions
These are generic figures but will largely reflect the position of any mid-sized dealer in any sector. Whilst the numbers will vary for larger or smaller dealerships, the overall effect is the same.
The result is startling!
By the end of year three, your new DMS has "saved" you £22,000, or to put another way, you would pay a surcharge of 32% over three years to stay where you were.
If you took this to the 7 year stage (the typical average change cycle for a DMS system) the saving is over £32,000!
It's important therefore to understand how different vendors apply pricing.
So, when doing the math, don't forget to look at the price increases built into your existing and prospective contracts. There are 3 options :-
It's also important to review when a contract is renewed (as highlighted in option 3 above). Most contracts are fixed term - so whilst there may be a rule for price increases during the contract, a new price will be quoted at renewal - which may be significantly higher!
Other contracts are permanently rolling contracts - there is no fixed term, no renewal, with a rule on price increases so you know what you are paying year on year in future.
In conclusion, when reviewing comparative pricing, don't look only at the headline figures - look at how the pricing may change in future.
One of the key questions that any dealership makes is what is the difference in cost between staying still and making a move to another Dealer Management System.
Read our article explaining how pricing in the Dealer Management System for Car, Van, Motorhome and Caravan Dealerships works so you can help decide which system may be the best for you.