Experian’s latest State of Auto Finance Market Report made headlines, painting a rosy picture for the used-vehicle market. Overall, pre-owned vehicles accounted for 55.61 percent of all financing in the second quarter of 2016.
Consumers across all credit tiers are flocking to pre-owned vehicles, with super-prime and prime consumers accounting for 44.95 percent of all pre-owned loans — a 2.6 percent year-over-year increase.
Dealers have ample opportunity to capitalize on this market dynamic with certified pre-owned programs and F&I products tailored to the pre-owned market.
Remember, the one hurdle pre-owned vehicles have always had to overcome is vehicle reliability. Even in this current market, you can bet vehicle reliability is still a hot button.
In addition, those prime and super-prime consumers are used to another level of sophistication when it comes to customer service and they will expect no less when shopping for pre-owned vehicles. This combination makes strong CPO programs market differentiators.
According to research from EFG Companies, 71 percent of consumers expect a CPO program to consist of:
— Thoroughly checked vehicles that are in working order
— Additional coverage
— Roadside assistance
Evaluate your CPO program based on this criteria. To be certified, your pre-owned vehicles need to pass a stringent inspection and repair process. Some dealers may be tempted to consider the inspection enough for a CPO sticker. However, by doing so they are leaving significant money on the table. Now, I know what you’re thinking: “providing complimentary coverage is an extra cost to me, what benefit do I get by giving away coverage and roadside assistance?”
To answer this question I ask that you go to your top-producing F&I manager and ask, “Which is easier to sell F&I products on: a car that comes with a warranty or coverage of some sort, or a car with no coverage whatsoever?”
I’m willing to bet your F&I manager will say they get the best penetration rates and the highest margins on vehicles that have a warranty or coverage built in.
Why, you ask? Because with those “built-in” products, your F&I manager has the opportunity to create a need by specifying where and how the coverage ends. Once they create the need, they then discuss the benefits of purchasing additional coverage to fill that need.
When a vehicle doesn’t come with a warranty or any type of complimentary coverage, F&I managers are often left floundering, trying to discover where to start the product presentation. This makes their jobs that much harder.
So yes, providing complimentary coverage is an added cost, but when weighed against the benefits of increased F&I product penetration and back-end margin, that cost turns into another area to generate revenue.
Of course, the complimentary coverage can’t be just any F&I product. Good CPO programs come with some form of limited powertrain coverage with roadside assistance, and possibly a short-term maintenance plan. With limited powertrain coverage, F&I managers have the potential to upgrade customers to a full vehicle service contract with nationwide roadside assistance.
With a short-term maintenance plan, your managers in finance and in the service drive will have ample opportunity to upgrade customers to longer-term and/or more comprehensive maintenance plans. In addition, these products offer good spring-boards into discussions around interior and exterior protection products.
John Stephens is executive vice president at EFG Companies. Other commentaries from EFG can be found at efgintelligence.com/dealershipcorridor.
BW Dealership Advisors — a Brady Ware-affiliated retail automotive consulting firm dedicated to offering consulting, fraud mitigation, accounting and tax services — announced this week that it has expanded its services to help dealers attract and engage clients online. The new digital capabilities will be led by Nick Brunotte, who joined the firm as senior operations consultant.
With Brunotte's added expertise, BW Dealership Advisors highlighted that it can help retail automotive clients with the online customer engagement aspect of their business, including web presence management strategies, business development centers, customer relationship management software processes, website effectiveness and other digital efficiencies.
“Dealerships are increasingly seeking ways to help them stand out from their competitors and build stronger relationships with customers,” Brunotte said. “I look forward to putting my dealership operations expertise and digital experience to work for the retail automotive clients we serve at BW Dealership Advisors.”
The firm highlighted Brunotte brings hands-on experience in dealership general management and operations to BW Dealership Advisors.
The firm went on to stress that clients will benefit from Brunotte’s ability to identify and solve the specialized challenges faced by retail automotive dealers, as well as his expertise in strategies for improving the profitability of service and finance and insurance (F&I) departments.
Brunotte studied finance at the University of Cincinnati and has more than a decade of management experience. He is actively involved in the National Automobile Dealers Association and has F&I certification from United Development Systems (UDS).
AutoPoint has announced a marketing solution called Sales Journey.
The company said Sales Journey addresses the challenge of attracting new customers and retaining existing customers as they prepare to buy or lease a new vehicle in a competitive dealer market. Its predictive targeting methods allow dealers to gain a marketing advantage at critical early stages in the sales process.
A data-driven approach such as this increases the dealer’s impact within the automotive sales sphere, allowing them to anticipate customers’ needs and co-opt competitors.
“Sales Journey creates an essential link between the service relationship and the sales lot,” said Mike Martinez, managing director of AutoPoint. “Smarter proactive marketing to the new-vehicle buyer eases the transition for existing service customers back to the sales lot, as well as engages new customers who subsequently join the retention cycle.
“Sales Journey gives dealers an effective way to reach those new customers before they’re lost to the competition,” he continued.
Dealership software provider MAXDigital recently announced Patrick McMullen, previously the senior vice president of customer success, will now be the company’s senior vice president of strategy and innovation.
MAXDigital explained McMullen will be traveling the country to deliver the company’s “Stop the Drop” message, which is geared to help dealers maintain gross profits and transform the way they deliver value during every sale.
Additionally, Rebecca Oistad has joined MAXDigital as the company’s vice president of marketing.
In her new role, Oistad will focus on building brand awareness, leading marketing communications and driving demand for the company’s digital retailing and inventory management software solutions.
“To stay competitive in the new digital auto retail industry, dealers must build trust and communicate value to maintain their market-based price,” MAXDigital chief executive officer Steve Fitzgerald said.
“Patrick and Rebecca will be instrumental in sharing how MAXDigital helps dealers navigate the changing buying process and retain their profits,” Fitzgerald continued.
McMullen has more than two decades of management experience in the automotive industry and has broad knowledge and industry expertise in pre-owned and digital retail operations. Since joining MAXDigital in 2007, he has impacted the company’s growth through his leadership of a customer-focused team that is responsible for ensuring client success, optimizing the product’s value, and driving insights.
McMullen has held positions at Enterprise Rent-a-Car, CarMax, and as a sales manager in the financial services industry.
Prior to joining MAXDigital in August, Oistad was the senior director of marketing at Enlivant, a national senior living provider. At Enlivant, Oistad was responsible for leading the development of a new brand and building a new marketing operations platform and strategy.
Prior to Enlivant, Oistad was VP of digital strategy and business development at Rand McNally.
More and more people are looking for their next vehicle online. That’s changed the nature of brick-and-mortar shopping, with many buyers starting the process digitally and finishing it at the dealership.
But a recent survey from Accenture revealed that shoppers are feeling a disconnect between their web and showroom experiences.
Consumers in the U.S., China and Germany who recently purchased a vehicle were asked to rate their perception of “seamless integration” on a scale of 1 to 4, with 4 being “most integrated.” The average rating was 2.32.
“Today’s consumers, influenced by digital technology, are driving the car-buying process. They are visiting showrooms to seek distinct information to supplement the information found on the web, and want counsel from product and customer experts instead of a traditional sales presentation,” said Axel Schmidt, managing director in Accenture’s automotive practice.
“As digitization increases, automakers and dealers can no longer afford to ignore full integration of their operations. They must work together more closely than ever to create a truly seamless, multichannel experience to satisfy customers," Schmidt continued.
Accenture made a distinction between consumers who shop online frequently (“Digital Natives”) and those who are more conservative online users (“Digital Laggards”). The report found that Natives visit the dealer more often than Laggards: 60 percent of them stop at their dealership more than twice before buying a car, while only 47 percent of latter do so.
Natives may need less time at the dealer because they have made their buying decision online. This emphasizes how the showroom’s role is being redefined as the place to finalize the purchase of a car, rather than the traditional starting point. The survey also showed that nearly all car-buying decisions are made online, and many customers do not believe that in-person interaction is necessary at each stage of the transaction.
Survey respondents also indicated there is room for improvement in digital channels as well as showrooms. Nearly half (43 percent) would consider purchasing a new vehicle online if prices were lower than those at the dealership. This is true for half of the Laggards, who said they would buy new vehicles online if prices were cheaper. They are also interested in advanced product configurators, online chat consultation, and enhanced reality-based experiences.
In terms of offline improvements, the survey found that in addition to wanting expert product advice, many respondents would like staff to be available to answer additional questions and provide recommendations regarding their purchase throughout the buying process — not just in person.
“There are clear opportunities for the industry to improve interaction with customers using new technologies like cloud-based customer relationship management, business-insights software and virtual- and augmented-reality technologies. Automakers and dealers have almost everything they need to make the online-offline experience more compelling, but what they need to do is to bring it all together and make it work,” said Schmidt. “That’s likely to be challenging, but it will be rewarding for those who are able to create strong multi-channel integration.”
While Accenture found that many buyers do not believe face-to-face interaction is necessary at every stage of the process, some parts of the process, i.e. clear-cut trade-in value and deal structure, can be difficult without it. Mike Burgiss, vice president of digital retailing at Cox Automotive, addressed the so-called “missing piece” in digital auto retailing in a recent Auto Remarketing story.
Buying preferences vary by country
Accenture found notable differences in where consumers wish to buy their cars. For example, interest in buying from an online store was highest among U.S. buyers at 19 percent, versus 15 percent of Chinese buyers and 10 percent of German buyers. Other findings:
—Chinese consumers showed the strongest preference for flagship stores, with 37 percent saying they would buy their next car at such an outlet, and 28 percent preferred picking up their new car from their dealer.
—Prospective buyers in Germany showed the strongest interest in buying a car at a standard dealership, with nearly half (46 percent) citing such a preference as their vehicle purchase location. Sixty-one percent also preferred picking up their car from the dealer. Twenty percent were open to auto retail outlets featuring advanced technologies, such as virtual reality experiences.
—Only 14 percent of U.S. respondents would prefer to purchase a vehicle from a flagship outlet. Thirty-five percent still prefer buying from a standard dealership.
“Despite these market differences, it is clear that automotive retail business models throughout the global market need to undergo a dramatic transformation to fully benefit from the multi-channel customer and fend off new market entrants, whose platform business models have already disrupted the second-hand car market,” said Schmidt.
Accenture carried out an online survey of approximately 3,000 consumers in China, Germany and the U.S. The survey participants are a representative number of private car buyers in each market who had purchased a new car in the past five years.
On Wednesday, DealerSocket wrapped up its annual User Summit, which included the opening keynote by founder and chief executive officer Jonathan Ord, who addressed attendees and provided insight into the company's future vision, the introduction of the “Blackbird” technology platform and several other product innovations.
“Blackbird is the result of DealerSocket’s vision, several years in the making, to create a streamlined automotive platform tailored to the future of automotive retail,” Ord said. “It has been built for power and ease of use, incorporating dealership feedback.
“The release of this completely rebuilt platform has been highly anticipated and User Summit is the perfect forum to make its introduction,” Ord continued during the gathering in San Antonio that featured more than 1,000 dealers and complementary service providers.
DealerSocket reiterated that Blackbird was developed and refined through intensive user engagement, including charting eye paths and mouse-based movements to refine the platform. The Blackbird platform is user-optimized, resulting in a customized portal with fewer clicks and simplified navigation. These innovations have led to improved operational efficiencies and a refined user experience.
Dealership Action Report released
The second annual Dealership Action Report (DAR) also debuted at User Summit. DealerSocket developed the DAR utilizing its proprietary data as well as calling upon Google and J.D. Power for additional consumer insight.
Incorporating data from Google Consumer Surveys, DealerSocket insisted this year's DAR is the first to compare data representing 11,000 dealerships to insights from 2,000 consumers who purchased a vehicle in the last 12 months.
The report also references customer satisfaction information from J.D. Power's Power Information Network to provide complete analysis of the consumer vehicle buying process.
Through the DAR, DealerSocket highlighted franchised dealers can develop methods to reform the buying process and improve long-term profitability by learning:
—Consumer preferences for the vehicle buying process
—Best practices in integrating mobile technologies and optimizing online presence
—Opportunities to improve customer experience and build fixed ops loyalty
“This year’s DAR provides a dual view, from the dealer and consumer perspective, of the vehicle buying process. Surprisingly, we found significant gaps in what dealers perceive to be the optimum experience and what consumers expect," said Marylou Hastert, director of product marketing at DealerSocket.
“As the industry cools after a year of record sales, it’s critical that dealerships focus on high-impact, data-driven processes to improve their margins,” Hastert added.
The Dealership Action Report is available for download at dealersocket.com/DAR.
Other User Summit highlights
In addition to Blackbird and the DAR, DealerSocket unveiled its new iDMS platform, which merges its FEXDMS and AutoStar products into a single comprehensive dealership management solution for the independent market. It is the first of all DealerSocket products to be integrated into the all-new Blackbird platform, maintaining a consistent user experience across the system.
User Summit attendees also took part in professional development tracks specially developed for advancement in the following topics:
—Customer relationship management (CRM)
—Digital marketing
—Inventory management
—Dealership management system (DMS)
—Fixed ops
—Customer experience
The American International Automobile Dealers Association has launched a pro-trade campaign that is being accompanied by a series of ads as well as a new logo for the 46-year old group serving 9,500 international nameplate automobile franchised stores.
“Our organization is comprised of businesses that serve communities across the United States and rely on a healthy global marketplace,” said AIADA chairman Greg Kaminsky, owner of Toyota of El Cajon, Calif. “Yet, much of the debate about trade paints it and globalization as a threat to American prosperity. It’s just not the case and this campaign seeks to make that clear.”
According to analysis by AIADA and the Association of Global Automakers, vehicles that consumers typically think of as imported actually comprise more than half of all U.S. vehicles sales, 56 percent of which are built in the United States.
AIADA claimed there are 9,500 international dealer franchises selling 8.3 million vehicles a year, creating 570,000 jobs here at home and supporting a payroll of $32 billion.
“Our message to Capitol Hill and the next administration is that when you put partisan battles and political rhetoric aside, the fact that remains is how open markets and free enterprise have contributed to the types of international commerce that lead to a flourishing domestic and global economy,” AIADA president Cody Lusk said.
The campaign will consist of outreach and advocacy in Washington, D.C., as well as targeted markets throughout the country. A series of ads will appear in Automotive News tapping into the campaign’s core themes of trade promoting consumer choice, job growth and a healthy economy.
AIADA has also updated its logo to highlight their role as the primary advocate for international nameplate dealers in Washington, D.C.
Late last week, Volkswagen Group of America finalized an agreement to resolve the claims of VW-branded franchised dealers in the United States relating to vehicles involved in “Dieselgate” and other matters asserted concerning the value of their franchise.
Under the proposed agreement, Volkswagen has agreed to make a maximum total of $1.208 billion in cash payments to eligible dealers and to provide additional benefits to resolve alleged past, current and future claims of losses in franchise value. The parties announced an agreement in principle on Aug. 25.
Auto Remarketing asked two top industry observers to assess the gravity of this move on Monday when Autotrader and Kelley Blue Book hosted its monthly conference call with the media.
“This cash settlement is certainly going to go a long way to keep the franchised dealer body feeling like they’re being heard and taken care of by Volkswagen after all of this emissions fallout,” Kelley Blue Book senior analyst Alec Gutierrez.
“First and foremost what Volkswagen has done right — or as best they can anyways — to keep the franchised dealers happy is to take care of the consumers with the initial package they offered, which included extended warranties and cash payments, let alone the buyout settlement that’s still coming along,” Gutierrez continued.
“I think Volkswagen’s done all they can, given the gravity of the situation. Maintaining a strong relationship with that dealer body is priority No. 1 for sure,” he went on to say.
The proposed agreement was filed this past Friday by the dealers’ counsel with the United States District Court for the Northern District of California. The automaker pointed out the move is subject to the approval of Judge Charles Breyer, who presides over the federal Multi-District Litigation (MDL) proceedings related to the diesel matter.
By its terms, OEM officials emphasized the agreement is not intended to apply to or affect Volkswagen’s obligations under the laws or regulations of any jurisdiction outside the United States, where the legal and factual circumstances relating to TDI vehicles differ.
According to VW’s announcement, the automaker has 652 franchised dealerships in its network.
Perhaps part of the dealers’ concern about their franchise value is softening consumer interest in VW vehicles since the controversy surfaced. The latest KBB.com site data shows VW traffic is down nearly 3.5 percent from last quarter and down nearly 16 percent year-over-year.
The settlement offer might be seen as VW recognizing what dealers are enduring.
“I would just say that there’s no relationship more important to Volkswagen right now than its one with dealers because they are on the front line for taking care of the current buyer base as well as any kind of future base. They need to really work that relationship and support the dealers. There’s just nothing more important for them right now,” Autotrader senior analyst Michelle Krebs said.
“They’re on the verge of unveiling some very important new products like the midsize SUV,” Krebs continued. “If they want to grow back here, they’ve got to do it through their dealers.”
Enterprise Car Sales recently opened two new locations to better serve customers in the Phoenix area.
To celebrate the openings, officials highlighted all Enterprise Car Sales locations in Arizona will appraise trade-in vehicles using Kelley Blue Book trade-in value plus an additional $1,000 in a move to be extended to vehicle buyers through Sept. 30.
“As the sixth largest city in the country, Phoenix has a high demand for quality used car-buying services,” said Chuck Maslin, Enterprise Group Car Sales manager in Arizona.
“With the opening of our new Scottsdale location and an expanded facility in the San Tan Motorplex in Gilbert, we’re well equipped to meet this local demand,” Maslin continued. “These locations allow us to display more inventory than ever before while improving the customer experience."
The Scottsdale dealership, located at 1723 N. Scottsdale Road, consists of 3,831 square feet and can accommodate more than 100 vehicles.
The San Tan Motorplex dealership is located at 1312 E. Motorplex Loop in Gilbert and is 13,192 square feet, sharing space with an Enterprise Rent-A-Car branch. The San Tan Motorplex dealership features an outdoor display space that can accommodate 135 vehicles as well as a dedicated indoor delivery area — making it the largest Enterprise Car Sales location in Arizona to date and one of the brand’s largest locations nationwide.
“Our flagship San Tan Motorplex facility replaces the former Enterprise Car Sales location in Tempe, Ariz., and represents the new look of our dealerships, which provides a truly customized car-buying experience,” Maslin said.
“The space allows car buyers to speak with our knowledgeable and no-pressure sales staff in a variety of settings to suit their comfort level — from high-top workstations in the showroom, to more private offices, to a comfortable lounge area equipped with WiFi and charging stations."
The company mentioned the new facilities in Scottsdale and the San Tan Motorplex join two other Arizona-based Enterprise Car Sales locations in Tucson and Peoria and represent the latest examples of the overall growth of the Enterprise Car Sales network of more than 130 locations nationwide.
So far this year, Enterprise Car Sales has relocated two other locations to enhanced facilities and opened three new dealerships, including Marlow Heights, Md., Ventura, Calif., and a fourth location in the Chicago area.
For more information about Enterprise Car Sales, visit www.enterprisecarsales.com.
This year, hundreds of independent dealers who previously attended Innovate: The Independent Dealer Conference will instead set their sights on DealerSocket’s User Summit. The seventh annual conference will host dealers from both the franchised and independent space with more than 1,100 guests expected.
This is the first year that User Summit attendees will be able to choose an independent track (from more than 70 total classes) that highlights today’s most pressing compliance issues, industry insights and best practices from other dealers, as well as new independent technology.
Breakout sessions will cover the latest developments in compliance; digital marketing; customer experience; DMS, CRM and inventory management technology; business management; sales and marketing; and more. There is even a track covering the sales, service, F&I and collections concerns of buy-here-pay-here dealers.
“We are thrilled to expand our annual User Summit to welcome former Innovate attendees into the fold. Last year, we introduced a small selection of independent classes, but starting this year, we are officially merging with Innovate and multiplying our schedule to include a Texas-sized offering for independent attendees,” said Peter Ord, national sales director, independent at DealerSocket.
“Whether you are a member of the DealerSocket family or just interested in educating yourself on the issues facing your business, User Summit will prepare you for the future of independent,” Ord continued.
Among what's in store, DealerSocket will officially launch Blackbird at this year’s event, complete with on-site demos. Blackbird includes the company’s brand-new CRM, as well as the long-awaited iDMS.
DealerSocket will also release its second annual Independent Dealership Action Report, a comprehensive, data-packed guide on the state of today’s independent industry and how dealers can thrive amid its challenges.
User Summit 2016 will take place Oct. 3-5 at the JW Marriott San Antonio Hill Country Resort and Spa. For more information or to register, visit http://usersummit.dealersocket.com/ind.
