Rutherford and Bond CEO Hunter Mitchell (right).

ONE of Toyota’s leading dealers in New Zealand, Hunter Mitchell, believes that the move to reinvent the dealership model will lead to increased sales for the brand once buyers come to understand the different experience in Toyota dealerships compared with other brands.

Mr Mitchell, who is the CEO and part owner of Rutherford and Bond that runs five Toyota dealerships in the Wellington region of New Zealand, was one of the key dealers involved in developing the new agency system with Toyota.

He said that dealers were confident the model would work because of the long period of collaboration between dealers and Toyota and the extensive business modelling on potential returns for dealers under the new arrangement.

“We certainly have not rushed into it. We have been talking about it for 10 years,” Mr Mitchell said.

“Toyota threw some ideas around a long time ago and, in typical dealer fashion, it takes a while to get our heads around some of these things, but, particularly in the last four years, there has been some really meaningful dialogue in terms of getting this across the line.

“But, with any change, there is a little apprehension and that is to be expected.

“However, Toyota are not doing this to sell less cars, that’s for sure.”

Mr Mitchell said it became clear that the buyers were unhappy with the traditional sales methods in dealerships.

“Toyota had been talking to the public about why they have not enjoyed the buying experience and we would have to be pretty naive to think that we would just keep boxing on and nothing would change,” he said.

Mr Mitchell said since the change started last weekend, early buyers “have wondered what it is about, but once we sit down with them and explain it they understand it”.

“The salespeople like it,” he said. “They can see that their role is now to really enhance the sales experience and they really like there is no banging of heads towards the end of the month and the end of the quarter, and they like the idea of that and they appreciate that.”

Mr Mitchell said the majority of customers don’t want to negotiate and they don’t like the idea that they might be paying more than others because they do not have strong negotiating skills.

“They are scared to negotiate and some are almost terrified,” he said. “With this system you look at the price on the site and you know that no-one is going to pay less than that. Once that message gets home I think it will bring more people to our brand on the basis of that alone.”

Mr Mitchell told GoAutoNews Premium that he thought not only would customers be more relaxed in an environment free of the stress of negotiation, sales staff would also be less apprehensive because they will not be trying to squeeze every last ounce of margin out of a deal. He said he thought that higher levels of staff retention would be a by-product of the new agency system.

Referring to savings on floorplan, he said that that saving was partially offset by the cost of buying more demo vehicles.

“In our business we are in five locations so the number of demonstrators we have to hold is quite high,” Mr Mitchell said.

“But that is just our particular situation, if you have one site which is the majority of Toyota dealers in NZ you go from holding a significant amount of new-vehicle stock to holding zero.

“Yes, you do need to hold more demonstrators because Toyota is very keen for us to have every model available but even for us with five sites there is a reduction in funding costs and for a one-site location it is a significant reduction in funding costs.

“It is a great model because typically you are reluctant to hold some demonstrators normally because you are thinking that no-one is going to want a demonstration of that. But Toyota’s demonstrator prices are very favourable and the ones that are a little unusual they will put in a pool and you draw out of the pool when required.

“But you are going to hold 90 per cent of what people want.”

A flat fee will vary depending on the type of vehicle.

Toyota NZ managing director and CEO Alistair Davis said that dealers expect to make more money under the flat-fee system than under the previous model where dealers depended on margin from the sale of cars they owned.

Mr Mitchell said Toyota had done extensive modelling on the returns from the flat fee-for-service on the sale of a car.

“It does depend on your territory slightly,” he said. “If you sell a lot of HiLux, for example, you are probably going to be better off under this model. Our territory sells a lot of small cars so we will not quite be as well off. So it is not the same across the whole of the country and it largely depends on the strength of what models sell well in your territory.

By John Mellor