October is many things to many people. To some, October means Halloween with its ghosts and goblins.  If you’re into sports, maybe it’s the World Series or the NASCAR championships. It’s also the start of the NHL and NBA seasons. To many, fall is their favorite season and the official kickoff of the holiday season.

To the automotive industry, it’s the final quarter of the year and more important, it’s the time to make sure you are set up for success next year — or for the next three years. This is the beginning of what will be a three-year challenging run of new-car traffic, trade-ins and used-car inventory.

The years 2020, 2021 and 2022 all had lower-than-normal new car sales and leases. Normally, this would be the time that owners with trade-ins would revisit the franchise locations where they got their car. Models estimate a used-car shortage over the next three years — 8 million in all.

That sounds scary! So why does this headline say, “There is nothing to be afraid of”? As a franchise dealer, you have a luxury: your own supply line!

It used to be said there’s no such thing as a used car factory … but that’s wrong! Your service department is your used-car factory. Yes, the service department creates customer loyalty, but if handled correctly, it can also produce the fastest selling, most profitable used-car inventory there is. And that’s homegrown inventory.

Homegrown means you sold the vehicle new and have done most of the service and maintenance in your service department. That vehicle then gets traded back in or becomes a lease return. Your team handled the reconditioning and now it’s being sold as a used vehicle at the originating dealership.

This is the inventory that’s most sought after by today’s more conservative, cost-of-ownership-sensitive car shopper.

There’s no crystal ball, but the best prediction of the future is the past. Public perception tells us that a vehicle that’s been well-maintained is less likely to break down than one that hasn’t been taken care of. These vehicles bring a premium that’s well above the average market, and they sell faster.

The key is to have a service inventory acquisition strategy. This is not the same as a service customer sales strategy.

The goal is to get high-quality used vehicles. Not everyone who is getting their car serviced is ready now to buy another vehicle. So, if you approach it as a sales opportunity first, you will miss out on these customers.

The numbers tell us that if you acquire a vehicle from a service customer, 70% will buy another vehicle from your dealership. There’s no reason to place a “salesperson” in the service drive; it’s not the most effective approach. This could in fact hurt customer loyalty if the salesperson handles customers too aggressively.

Remember: Inventory acquisition is the primary goal.

When you create a well-designed, consistent service-to-sales acquisition strategy, you should be able to get from a third to half of your used car inventory from homegrown vehicles.

–Just The Fax

By Robert Grill, Carfax Vice President of Strategic Client Services

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