WVU Time Value of Money in Business Discussion – Description
First, spend a couple of sentences summarizing the Concepts in Action video you watched this week. Then, answer the following. What do you think the speaker in the Concepts in Action video you watched this week meant when he mentioned that he talked about the time value of money with his managers? Can you think of an example in your own work history or something you’ve read about where the time value of money might be relevant?
I’m third generation, my grandfather started this company in the mid ‘40s, my father took over in the late ‘50s, and I took over in the early 2000s. We retail automobiles; we have two Toyota stores, two Honda stores, Ferrari/Maserati, a used car center, and a body shop. I also distribute Subarus throughout New England.
We have north or south of $100 million in the lot at one time.
New cars, until you get to the end of the model year, pretty much hold their value all year.
But with used cars – I learned this from my father – used cars he considered used cars like a fruit stand.
You have to turn over the inventory or the depreciation will kill you.
It’s like fruit, you have to…you have to sell it while it’s fresh.
We have a custom program for the retail stores that we developed that’s part of our proprietary software, which will punch up the oldest vehicle in stock.
So if you want a Corolla, the chances of you buying the Corolla that was just delivered yesterday is pretty rare, unless that car is rare, and it’s the only one that’s on the lot, and of course, you’d get it.
But we keep the inventory moving very very well, so the car’s are fresh, there’s no damage, everything’s beautiful.
We’re not really chasing too much money that’s out there.
The factory will help the dealer finance the vehicle.
We pay within 30, sometimes 15.
They turn the vehicle, they don’t pay.
Mark Doran: Well we’ve…our inventory at this store has been as high as over $50 million.
My name is Mark Doran, I’m the general manager at Boch Honda.
I’ve been with the Boch organization about 12 years.
And I often use the time value of money in my remarks to the managers – the sales managers – on the desk.
We have to move these vehicles, and they’re not appreciating as they’re sitting in the back.
Boch: I think the business is a success.
I mean, it makes money, we’re…we lead the nation in sales, we lead the nation in innovation.
There’s many many things we do that other dealers don’t do.
Doran: The owner of the company used to pay cash for the vehicles; there was no floor plan.
Floor planning is that we finance through a bank that we have a relationship with.
It’s cost effective for the dealership and for the owner of the company for us to have that relationship with the bank.
Boch: Well, we don’t have any mortgages, so we’re not paying the bank for the land and the building, and the strict cost control and the sheer volume that we do allows us to sell for less.
Commercial: Nobody smashes sticker prices on new 1966 Dodge’s…
Doran: On pre-owned cars, we…the rule of thumb is 60 days, and if we haven’t sold the car in 60 days, we send it to the auction.
On new cars, we’ll have some cars in inventory, but we’d like to move them within 90 days.
Commercial: The second-largest Toyota dealer on the planet.
Boch: My two Toyota stores sell as many cars as five or six or seven Toyota stores combined.
Doran: There are many options to the customers on financing.
Boch: You can pay cash for the vehicle out of your savings or wherever, you could finance it yourself with your credit union, your bank, or you could finance through us.
And we are a pass-through, you aren’t financing with Boch Automotive, you’re financing with Toyota Motor Credit, or one of the many banks that we use.
Doran: It makes the whole process a lot easier, if we can accommodate them and finance the vehicle here, they can often take the delivery of the vehicle the same day.
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