Welcome to another edition of the Car Dealership Guy Podcast Recap—a rundown of key lessons from top operators, founders, and execs shaping the future of auto retail.
Today’s guest is Donald Kemp, General Sales Manager at Stowasser Buick GMC.
We dig into why human-first social content is outperforming inventory posts, how moving F&I earlier drives higher penetration, and where dealers are quietly leaking money through junk fees.
Used car profitability today depends on speed, not spread.
Kemp described a used market where values are rising week-to-week instead of falling, making traditional buying assumptions unreliable.
"Right now we're seeing a lot of, I don't know, I would call it volatile. I can't predict necessarily what's going to happen with the values."
With auction costs climbing and book values shifting, the strategy is to price competitively and turn fast, not hold for bigger grosses.
Auction inventory is fueling the store, but street and service buys are the growth lever.
Today, about 70% of used inventory is coming from auction, with the remainder from trade-ins and off-the-street efforts.
"Our mix right now is probably about 70% auction. The rest is just us getting in trade-ins and trying to you know get creative through social media and so forth to get off the street purchases."
Operating on California’s Central Coast, the store is heavily focused on trucks and SUVs. But Kemp is clear: long term, strengthening service-drive and direct acquisitions will reduce reliance on volatile lanes.
Competitive pricing is squeezing front-end gross, forcing profit discipline elsewhere.
Aggressive pricing combined with higher acquisition costs has compressed front-end margin.
"We're pricing things heavily competitive in the market and having to pay a little more at auction, our grosses, I would say overall have decreased on the front end."
Instead of resisting the shift, the store is rebalancing profit across departments.
Moving F&I upfront is increasing trust and penetration.
Rather than waiting until customers enter the finance office, Kemp shifted product conversations to the beginning of the sales process.
"What we changed is we do that all from the very beginning. So from the moment that they start the process, we're discussing the service contract and discussing all those options."
Simply put, the goal is to eliminate surprise and build value earlier.
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Product education for sales staff is driving measurable backend growth.
Kemp noticed that many stores “mention” products but don’t ensure the sales team understands them well enough to explain benefits clearly.
"Once I did that, I think we increased about 15% at that year. That was 2024."
By making sure sales staff can confidently explain coverage and protection options, backend penetration climbed meaningfully.
Standardizing service contract pricing is protecting penetration in a capped lending world.
On higher-priced trucks, lenders were capping what they would finance on service contracts.
"We were running into issues where, you know, a lot of the lenders weren't able to hold that price [at] say $6,000 for a service contract. The lender had a cap at 4,000."
To work within that reality, the store set a standardized service contract price of $4,250, then allows customers to tailor coverage from there. That structure improved lender alignment and reduced friction in funding.
Retail banks are outperforming credit unions in fee structure and reserve opportunity.
Kemp explained that credit unions in his market often charge per-deal processing fees—around $75 per transaction. Instead, the store increased volume with retail banks that offer competitive rates without those fees.
"Instead of going to a credit union that's going to charge us the $75 processing fee, finding a a lender that doesn't have that processing fee but can be competitive in the same rate range."
He also highlighted stronger backend programs at lenders like Fifth Third and TD, improving reserve opportunity while reducing transactional cost.
Vendor loyalty without benchmarking is quietly draining margin.
When reviewing the store’s budget, Kemp found long-standing vendor relationships that hadn’t been price-checked in years.
"Instead of looking at everything from a relationship standpoint with everyone, we kind of did the more aggressive approach and said, 'Hey, look, this is what we could be paying elsewhere. We want to keep that relationship going.'"
From reconditioning vendors to print materials, simply benchmarking market rates unlocked savings without sacrificing service quality.
Credit card processing fees are a hidden profit leak in many stores.
Kemp worked with Merchant Advocate to audit card transaction fees and discovered costs that weren’t clearly visible in standard reporting.
"When you're charging credit card fees and debit card fees, you don't see that on the reports. We're going to save just on that, which is something you almost wouldn't even think about, but we're going to save over $7,000 just by that company jumping in and helping."
For stores taking large down payments via debit or credit card, these “invisible” fees can compound quickly.
Leadership sets the emotional climate when the market feels uncertain.
Also during the podcast, Kemp acknowledged that consumer hesitation is real in his market, with some buyers choosing to “wait it out.” In that environment, he says leadership tone matters.
"One thing I would like to say, especially for all the the smaller dealers that are out there, is…if you're in a position where you're a leader in your store, you just got to remember that as a leader, you bring the weather."
When external headlines weigh on customers and employees alike, he believes the store’s internal environment must remain steady, confident, and solutions-focused.
