Automobile and Motorcycle Dealers Industry Terminology

Absorption Rate (Fixed Ops Absorption)

The percentage of a dealership’s total overhead covered by gross profit from service and parts. Higher absorption reduces dependence on vehicle sales.

-We’re at 85% absorption; goal is 100% so service covers the lights and rent. -Improve absorption by increasing ELR and parts gross. -Warranty volume from the OEM helped our absorption this quarter.

ACV (Actual Cash Value)

The real wholesale value assigned to a trade-in, reflecting condition, miles/hours, recon costs, and market demand.

-The ACV on the trade is $7,800 after recon. -If payoff exceeds ACV, you’ve got negative equity. -Let’s check Black Book before finalizing the ACV.

Addendum Sticker

Dealer-created label displayed beside the Monroney listing dealer-installed accessories, services, or market adjustments and their prices.

-The addendum shows $1,495 for tint and nitrogen. -Our motorcycle addendum includes freight and setup. -Confirm state rules on addendum disclosure before printing.

Aged Inventory

Units that have sat unsold past a set threshold (e.g., 60/90/120 days), increasing floorplan expense and risk.

-We’ve got 22 aged units over 90 days that need action. -Run a weekend blowout to clear aged bikes. -Move the 120-day ATVs to auction before the next curtailment.

Allocation

The number and mix of units the OEM assigns a dealer, often based on sales performance, turn rates, and market share.

-Hit your CSI and volume targets to improve allocation. -EV allocations are constrained in our region. -We need more adventure-bike allocation before spring.

Appraisal

The process of evaluating a vehicle’s condition, history, and market to determine ACV and trade allowance.

-Do a full walkaround appraisal with the customer present. -Pull the history report before finalizing the appraisal. -Use live market data tools to support your appraisal number.

Appointment Set-Show-Sold Ratio

BDC/Internet metric that tracks conversion from appointments set to shows to sales; used to manage lead handling quality.

-We’re running 70/60/30 on set/show/sold this month. -Confirmation texts improved our show rate by 10 points. -Spiff the team on shows and sold to lift ratios.

As-Is Sale (No Warranty)

A used-vehicle transaction where the dealer offers no warranty; the buyer accepts the vehicle in its current condition, subject to applicable laws and FTC Buyer’s Guide.

-This unit is sold as-is; sign the Buyer’s Guide. -Some states limit disclaimers—check our compliance matrix. -Disclose as-is status during the menu presentation.

Back-End Gross

Profit generated in F&I from products (VSC, GAP, maintenance), lender reserve, and ancillary items, separate from front-end price gross.

-Our back-end per copy is up $200. -GAP and VSC drove back-end on that deal. -Aim for balanced front-end and back-end gross.

BDC (Business Development Center)

A centralized team that handles inbound/outbound calls, internet leads, and appointment setting for sales and service.

-Route web leads to the BDC within five minutes. -Our service BDC filled next Tuesday’s lane. -BDC scripts increased our set rate by 8%.

BHPH (Buy Here Pay Here)

A retail model where the dealership finances customers in-house and services the loans, assuming credit risk.

-Collections discipline is everything in BHPH. -We hold paper at 24% APR within state caps. -Repossession losses increased our BHPH charge-offs.

Book Values (KBB/Black Book/J.D. Power)

Third-party valuation guides used by dealers and lenders to book out vehicles and support ACV and loan decisions.

-Black Book wholesale is $9,200. -Use J.D. Power for powersports valuations. -Lender requires a book-out with the deal jacket.

Buy Rate

The base interest rate approved by the lender before any dealer markup; determines potential reserve.

-Tier 1 buy rate is 5.49% on this app. -We took a 1-point markup above buy rate. -This lender pays a flat—no rate markup allowed.

Cap Cost (Capitalized Cost)

The agreed-upon price used to calculate a lease after incentives and fees; the starting point for payment calculation.

-Negotiating cap cost lowers the lease payment. -Acquisition fee is included in cap cost. -We applied the trade equity as a cap cost reduction.

Cap Cost Reduction

Upfront money (cash, trade equity, rebates) that reduces the capitalized cost in a lease.

-They put $2,500 down as a cap reduction. -OEM lease cash can be a cap reduction. -Advise against heavy cap reductions due to total-loss risk.

Certified Pre-Owned (CPO)

OEM-backed program for used vehicles that pass inspection and include warranty/benefits, usually commanding higher gross.

-CPO requires the OEM’s inspection checklist. -CPO coverage helped close at asking price. -CPO bikes may have different eligibility rules than cars.

Chargeback

A clawback from a lender or product provider when a loan pays off early or a product is canceled, reducing prior F&I income.

-Early payoff triggered a $450 reserve chargeback. -VSC cancellation created a chargeback this month. -Track chargeback exposure in your F&I statements.

CRM (Customer Relationship Management)

Software and processes for tracking leads, follow-ups, customer communications, and lifecycle marketing.

-Log every call and text in the CRM. -Drip campaigns come out of our CRM. -Integrate CRM with DMS for cleaner data.

CSI (Customer Satisfaction Index)

A customer experience score tracked by OEMs and dealers; affects bonuses, allocation, and reputation.

-We hit our CSI target and earned the OEM bonus. -Service CSI is dragging sales CSI. -Follow-up calls from the BDC lifted CSI by 5 points.

Dealer Holdback

OEM payment back to the dealer, often a percentage of MSRP or invoice, meant to help offset floorplan and carrying costs.

-Holdback isn’t a negotiable line item. -Holdback timing varies by OEM. -Motorcycle OEMs may not offer traditional holdback.

Dealer Reserve

Finance income from interest rate markup or lender-paid flat fees on arranged loans, subject to policy and law.

-Reserve is capped at two points above buy rate. -We chose a $200 flat instead of markup. -Track reserve by lender to manage profitability.

Desking

Structuring deals and presenting options (price, term, rate, lease vs. finance) to customers, balancing gross and approvals.

-Desk three options: cash, finance, and lease. -Rehash subprime deals before desking final numbers. -Use a desking tool to calculate taxes and fees accurately.

DMS (Dealer Management System)

The core dealership platform for inventory control, repair orders, accounting, payroll, and deal processing.

-CDK and Reynolds are widely used DMS platforms. -Push leads from the CRM into the DMS. -Our powersports DMS integrates parts microfiche.

DOC Fee (Documentation Fee)

Dealer fee for processing paperwork and titling; amounts and disclosures are regulated at the state level.

-Our doc fee is $499 per state cap. -Include the doc fee in advertised price if required. -Motorcycle doc fees differ across our stores.

E-Contracting

Executing retail and lease agreements electronically using e-signature and secure vaulting; speeds funding and reduces errors.

-This lender supports full e-contracting. -Upload stips and book the deal electronically. -E-contracting cut our CIT time by two days.

Equity Position (Positive/Negative)

The difference between a customer’s loan payoff and the vehicle’s value (ACV or market); negative equity means upside-down.

-They’re $3,000 negative on the truck. -Use rebates to absorb negative equity where possible. -Equity mining targets customers with positive equity.

EV Incentives

Federal, state, and utility credits/rebates for eligible electric vehicles; availability and rules vary by program and model.

-Confirm Clean Vehicle Credit eligibility and dealer transfer. -State rebates may apply to e-motorcycles. -Verify VIN eligibility and MSRP caps before advertising.

F&I (Finance and Insurance)

The department that arranges financing and offers protection products (VSC, GAP, maintenance) while ensuring compliance.

-Our F&I PVR target is $2,000. -Use compliant menu selling in F&I. -F&I turned funding in three days this week.

Fixed Ops (Fixed Operations)

Non-vehicle sales departments—service, parts, and body shop—that provide recurring revenue and gross.

-Grow fixed ops to stabilize cash flow. -Parts-to-labor ratio is a key fixed ops KPI. -Lane processes improved our ELR in fixed ops.

Floorplan Financing

A revolving line of credit used to finance inventory; interest and curtailments accrue until the unit is sold and paid off.

-OEM offers 90 days of floorplan assistance. -Aged units are racking up floorplan interest. -Audit units regularly to avoid curtailment issues.

Front-End Gross

Profit from the selling price of the vehicle before F&I products and reserve, net of trade/discounts.

-Front-end on that SUV was $1,200. -Don’t sacrifice all front-end chasing back-end. -Price-to-market compression is squeezing front-end.

FTC Safeguards Rule

U.S. data security requirements for dealerships that handle customer information, including risk assessments, a Qualified Individual, vendor oversight, and incident response.

-Appoint a Qualified Individual to oversee Safeguards. -Complete the annual risk assessment and training. -Ensure vendors meet Safeguards requirements.

GAP Insurance

Protection that covers the difference between a loan/lease payoff and the vehicle’s ACV if the unit is totaled or stolen.

-GAP saved them from paying $3,000 in negative equity. -Most captives allow GAP on leases. -Disclose exclusions and claim process during menu.

Hard Adds (Aftermarket)

Physical accessories or modifications installed by the dealer (e.g., lift kits, exhaust, tint), often priced on an addendum.

-This truck’s hard adds include a lift and wheels. -Non-residualized hard adds raise lease payments. -Coordinate installs between parts and service to hit ETA.

Incentives

OEM-to-consumer or OEM-to-dealer programs such as rebates, bonus cash, loyalty/conquest, dealer cash, and volume stair-steps.

-Stack loyalty with lease cash on this model. -Incentives vary by ZIP and VIN. -Don’t advertise conditional incentives as guaranteed.

Internet Lead Management (ILM)

Processes and tools for capturing, routing, and responding to online leads quickly and consistently.

-Maintain a five-minute ILM response SLA. -Personalize templates by model and intent. -Measure lead-source ROI through the ILM.

Inventory Turn

The rate at which inventory sells, typically units sold divided by average inventory over a period; higher turn improves ROI and lowers carrying costs.

-Aim for 12 turns annually on used. -Price-to-market at 95% to increase turn. -Wholesale aged units to improve overall turn.

KPI (Key Performance Indicators)

Quantifiable metrics used to manage performance across departments (e.g., PVR, CSI, turn, ELR, show rate).

-Weekly KPI review drives accountability. -Set KPI targets for each salesperson. -Monitor fixed ops KPIs like hours per RO.

Lease Money Factor

The lease finance rate expressed as a small decimal; multiply by 2400 to approximate APR; can be marked up by dealers per policy.

-MF .00125 is roughly 3% APR. -The captive subvented the money factor this month. -We marked up MF by .00040 for reserve.

Lien Payoff

The amount needed to satisfy the customer’s existing loan when taking a trade; must be verified with a 10-day payoff.

-Get a 10-day payoff from the lienholder. -Include the payoff on the buyer’s order. -Payoff exceeds ACV, so there’s negative equity.

LTV (Loan-to-Value)

The ratio of the loan amount to the vehicle’s value; lenders set maximum LTV thresholds to manage risk.

-LTV is capped at 120% including products. -High LTV requires stronger down or shorter term. -Motorcycle lenders often allow lower LTV than auto.

MCO/MSO (Manufacturer’s Certificate/Statement of Origin)

The ownership document for new, untitled vehicles/powersports units provided by the OEM; required for titling.

-Title clerk needs the MSO to register the bike. -Secure MSOs in a safe until delivery. -Powersports units ship with an MSO, not a title.

Market Day Supply (MDS)

The estimated number of days it would take to sell current market inventory at the current sales pace for a given model/trim.

-High MDS suggests pricing below market to move units. -Target low-MDS vehicles for acquisition. -Use MDS in your appraisal justification.

Markup

The increase over cost or buy rate used to set selling price or finance rate; constrained by policy and law.

-Rate markup limited to 150 bps here. -Use a parts markup matrix in fixed ops. -Minimal markup on high-MDS models to drive turn.

Menu Selling

Presenting optional F&I products in a standardized, transparent menu to improve acceptance and compliance.

-Show good/better/best menus every time. -Digital menus increased our product penetration. -Menu notes document declines for compliance.

MSRP (Manufacturer’s Suggested Retail Price)

The OEM’s recommended retail price shown on the Monroney label; a reference point for pricing and incentives.

-We’re asking MSRP on the new EV. -Dealer cash lets us discount below MSRP. -Motorcycle MSRP excludes freight and setup.

Negative Equity

When the customer’s payoff exceeds the vehicle’s value (ACV or market), often rolled into the new loan.

-They’re $2,000 upside-down on the trade. -Recommend GAP to protect negative equity situations. -Use longer terms cautiously to absorb negative.

Non-Prime/Subprime Finance

Financing for customers with lower credit scores; often involves higher rates, tighter LTV/PTI, and additional stipulations.

-Non-prime deal needs proof of income and residence. -Shorter terms and higher down helped the approval. -Route these to the special finance manager.

OEM (Original Equipment Manufacturer)

The vehicle or motorcycle manufacturer that builds and supports the product and sets program rules.

-OEM incentives change next month. -Use OEM parts for warranty repairs. -Allocation depends partly on OEM CSI metrics.

Out-the-Door (OTD) Price

The total price a customer pays including vehicle price, accessories, taxes, title, registration, doc fee, and any other required charges.

-Always quote an OTD price to avoid surprises. -OTD varies by county tax and tag fees. -OTD on the bike includes freight and setup.