One of the key factors in whether to stay with your existing system provider or moving to a new one is to review the price difference between staying still or making the move.

This is a complicated subject, and we understand - as a company that makes Dealer Management Systems for Car, Caravan and Motorhome dealers - that this is a very difficult part of the equation to understand.

So, we asked Simon Verona, our Founder and Managing Director for his thoughts on the subject.

Obviously, feature functionality is important, but many dealers will come to the conclusion that there are benefits to moving to another system.

However, there are costs which need to be balanced against the benefit. The key cost is the actual lifetime cost of the system moving forwards. The initial and monthly fees that you will be paying now, compared to the quotation for a prospective new system may be considering?

It is important when comparing that the true long term cost saving is taken into account when making the comparison.

Most Dealer Management System contracts will have the ability to adjust pricing throughout the contract. This is a natural feature of long term relationships and this needs to be factored in when doing your cost comparison.

It is not unusual to find that a new Dealer Management System works out slightly cheaper than an incumbent solution - maybe to the tune of 10% or more.

10% of a typical solution may not be a huge amount in itself and in itself may not justify the decision to change - at initial glance..

The above chart shows the comparison based on potential future inflation.

So, the chart was made in Nov 2022 and made with the following assumptions

• A £1000 per month cost for the existing solution (typical for a mid-sized dealership)
• Inflation of 10% applied by the incumbent system in Jan 23
• Inflation of 5% applied in Jan 24
• Inflation of 2% in Jan 25
• Exactly the same inflation for the potential new solution but with Price increases in Mar rather than Jan.
• No price increase on the new solution until it is 12 months old.

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These are generic figures but will largely reflect the position of any mid-sized dealer in any sector. Whilst the numbers will vary for larger or smaller dealerships, the overall effect is the same.

The result is startling!

You would pay a surcharge of 32% to stay still!

By the end of year three, your new DMS has "saved" you £22,000, or to put another way, you would pay a surcharge of 32% over three years to stay where you were.

If you took this to the 7 year stage (the typical average change cycle for a DMS system) the saving is over £32,000!

It's important therefore to understand how different vendors apply pricing.

What sort of terms are typical in contracts?

So, when doing the math, don't forget to look at the price increases built into your existing and prospective contracts. There are 3 options :-

1. Price increases in line with inflation - this is the best option as it simply means that pricing is "fixed" in real terms
2. Price increases applied capped at a certain percentage - you have the risk of above inflation rises if this percentage is higher than inflation
3. Price increases applied annually - this normally applies to those with 12 month renewals - you have no idea what next year's price may be.

It's also important to review when a contract is renewed (as highlighted in option 3 above). Most contracts are fixed term - so whilst there may be a rule for price increases during the contract, a new price will be quoted at renewal - which may be significantly higher!

Other contracts are permanently rolling contracts - there is no fixed term, no renewal, with a rule on price increases so you know what you are paying year on year in future.

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Conclusion

In conclusion, when reviewing comparative pricing, don't look only at the headline figures - look at how the pricing may change in future.

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