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Shopping for a Dealer Management System

November 22, 2010

Computer costs now represent a dealer’s fifth greatest expense. Paying for the best computer system may well be worth the cost, but only if the dealership uses the system to its maximum advantage.

 

A common misconception is that computer costs are not negotiable; they are. A dealer can shop for competitive Dealer Management Systems, and he can change his DMS if, for instance, existing equipment or connectivity need upgrading, or if the business is expanding.

 

Regardless of the reason for investigating a new DMS, five questions must be posed to any vendor:

 

  1. Does this proposal or contract represent too much computer—or too little? What features and benefits do I really need or want?
  2. What is the true cost of this system and all of the monthly support?
  3. What is the best way to pay for this system? Cash? Finance? Lease?
  4. What are the terms and conditions of the final contract—the binding document that is the actual legal structure of the acquisition?
  5. What negotiating strategy can I employ to achieve the best results? The most challenging aspect of the DMS acquisition is determining the right price to pay for the right system.

 

A careful evaluation process to answer those questions should include the following:

 

  • Outline the dealership’s computer needs, and get a proposal from more than one vendor.
  • Ask each vendor to demonstrate products to all key managers.
  • Make sure any proposals are detailed, with each item individually priced.
  • Get a terminal/PC schematic.
  • Don’t limit any proposal because you think you can’t afford everything on it.
  • Include sufficient capacity for future growth.
  • Include remote access to the system.
  • Check the proposal for omissions of related costs—data archiving, for example, or interfaces for factory communications, parts cataloging, training and the like.
  • Identify and explain any update charges.
  • Get detailed laser-printer pricing schedules and forms set-up charges.
  • Consider training and network rewiring costs.
  • Be aware of existing leases and other contractual obligations.
  • Know the lease rate or APR.
  • Consider data archiving and disaster recovery procedures.
  • Set a time limit for the proposal.
  • Decide whether to keep any current DMS or acquire a new one.

 

Each of the points above, and other considerations such a reducing the computer bill, protecting the network and protecting customers, is expanded upon in NADA Management Guide BM26, "A Dealer Guide to Negotiating with Your Computer Vendors."

 

Dealers can obtain the guide by calling NADA Management Education at 800-252-6232, ext. 2.

 

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