Dealership Turnover Is Too High and It's Hurting Profitability - AutoSuccessOnline
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Dealership Turnover Is Too High and It’s Hurting Profitability

Employee turnover can be detrimental to a dealership … the Golden Handcuff method of employee retention helps companies keep their key players.

David Graham is the vice president, advanced markets for The Atticus Group

The average turnover rate at dealerships was 40% for employees and 67% for salespeople in a 2018 study conducted by Cox Automotive. This turnover rate costs dealerships money in lost vehicle sales.  Specifically, the turnover leads to 1) wasted search and training expenses to replace the employees, 2) inexperienced sales and operation staff and 3) lack of continuity with customers and leads to a diminished customer experience. This level of turnover results in lost gross profits of $500,000 annually for an average dealership and $8 billion as whole for the automotive industry, according to an article from the National Automobile Dealers Association Dealership Workforce Study.

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Ways to Promote Employee Retention

Employee retention is a process in which the employees are encouraged to remain with the dealership for the maximum period of time or until the completion of a project.  Retention is beneficial for the dealership as well as the employee.  

High-performing employees are often the most valuable asset of the dealership. A company that cannot hold onto its best and brightest employees will suffer some costly consequences including the loss of gross profits. Ironically, few dealerships take the proper steps to minimize the risk of losing top employees. It is essential that your company put in place the proper arrangements that will ensure your key players stay where they belong: with you.  


You may think offering bonuses sounds like your best option, however, you are only as good as the last bonus, or the ability of a competitor to match or exceed a competitive bid for your employee. Retaining your key employees with a “golden handcuff” arrangement using life insurance, which primarily provides retirement income and death protection, may be an effective way retain your key executives. 

Golden Handcuffs: What Are They? 

Golden handcuffing is a method to help retain and reward key employees. Dealerships that design and implement effective golden handcuff plans can accomplish the following important outcomes:
• Reduce the risk that top employees leave prematurely or unexpectedly. 
• Provide a benefit that cannot be matched by competitors.
• Protect the company against the risk of losing customers, employees or trade secrets should an employee who has those relationships and information leave. 
• Provide full cost recovery for the dealership including a projected rate of return on the company’s participation in the planning.


A golden handcuff strategy provides a key employee benefit that a competitor cannot easily or even possibly replace. A handcuff plan utilizing life insurance, with its tax benefits and corporate pricing, is the preferred program for both employees and dealerships. This planning allows a company to provide a retirement income and permanent life insurance benefit to your top employees; and will either be cost neutral or provide a positive return for the employer. 

Golden handcuff plans can be offered to the selected key employees to the exclusion of all others. Plans may be designed to provide a specific amount of retirement income or equity-based valuations to determine benefits triggered by sale, retirement date or death are available.  


If your company is truly looking to retain and reward your best employees you must offer the following qualities in your golden handcuff plan: 

A True Benefit: You must offer something to your employee that they cannot receive cost-effectively anywhere else. 

Customizable: It must provide the employer a cost-effective way to provide a benefit to only key employees. It may be customizable to each person’s needs whether it be retirement income or widow/family income needs or both. 

Pot of Gold: Your plan must discourage valuable employees from leaving your company for whatever reason prior to fulfilling the intended employment goals. They would have a hard time walking away from a valuable pot of gold. As the employer, the company keeps the gold to hire a replacement or enhance the remaining key employees. 


One of the biggest threats your business faces is the possibility that your top employees will move to a competitor. Not only does this result in a loss for your organization, but it results in a gain for your competition. It is essential that you put in place the proper arrangements that will ensure your key employees stay where they belong. Whether you’re looking for control, flexibility, simplicity or deductibility in a benefit design, using a golden handcuff plan may provide the added incentives to keep your key executives with your organization and keep your organization at the top.

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