New Car Sales Are Up! Prepare or Beware?

[Joe Marconi]

As the economy recovers, new car sales will increase. The aging US fleet, which was predicted to be a boom for repair shops, never really materialized as we thought it would. As an industry, independent repair shops survived and some faired quite well. Just not to the extent that many of us predicted. That’s not to say we did not have opportunity, we did. However, as we painfully found out, when people are out of work, feel poor, and when consumer confidence is low, it makes our job a lot more difficult. Shops owners were put to the test and proved to be both resourceful and resilient during the great recession. Shop owners will be challenged once again, very soon.

Consumers are returning to the new car show rooms. That 220,000 mile, 12 year old Ford Taurus, your customer has been driving, has seen better days. It’s time to go car shopping. Around the country dealership are preparing for the surge in sales and we, as repair shop owners, need to prepare also. Why? Consumers will see and experience a different breed for new car dealerships. Many new car dealers are starting to “get it.” The economic climate in the U.S., along with stiff competition from Europe and Asia resulted in many casualties, resulting in a steep decline in new-car dealership numbers, particularly among the Big Three. But just as in the wild, the thinning of the heard is good news for those new car dealers that survived.

 

New car dealers and car makers understand, better than ever, that the service department can have a decided influence in future new car sales. In a recent Wall Street Journal article, a GM spokesman stated that when consumers use the dealer for their scheduled maintenance, those consumers are twice as likely to purchase another GM car. Plus, no one car maker dominates the market to the degree where their dealership can solely rely on car sales as their only income stream. Income from the service department and parts department are crucial to today’s dealership model.

 

Marketing programs and strategy, such as Toyota Care, and other free maintenance plans will continue and most likely spread to most car companies. The aim is to lock-in the customer to the dealership through the service department, which hopefully will reduce the defection rate that was so prevalent in years past. Just do a search of your own database and you will find many of your customers who have not returned to you since purchasing or leasing new cars because of perceived “Free Maintenance.”

 

New car dealerships across the country are also undergoing remolding and restructuring. Improvements will be made in not only increasing dealership physical size, new equipment and appearance, but changes to the service area as well. This is all geared toward enhancing the customer experience. Some average sized dealerships will be transformed into mega-dealers. The overall goal: To capture as much of their prospective market as possible.

 

Should you be concerned? Well, you should. This is not to say that I think all the dealers will become so powerful that they will knock us into oblivion. Most dealers will make all the cosmetic improvements, make all the attempts at the delivering great customer service, and pour tons of money into their dealerships. And most of them will fail at making a difference. The reason? Ultimately, the car makers and car dealerships want to sell new cars. And that makes them vulnerable. If the heart and culture of the company is truly not in line with the customer and maintaining their car, no plan will fully work. Only those dealerships that truly give up the notion of buy and replace a car every few years, will make an impact.

 

So, what do we do about this? The first thing is not to bury your head in the sand and fall prey to that old adage that the dealers don’t know what the heck they are doing and that none of your customers would ever think of going back to the dealer for service, especially after the warranty period. That may have been true in 1990, not anymore.

 

The perception of the new car dealer is slowly changing and people are also economically tired. One of the reasons why they will buy a new car is because they are tired of putting money into that old clunker. Car makers and salesmen will continue to campaign their propaganda that these new rocket ships on wheels need very little maintenance and because they are so complicated, the dealer is your “best” choice.

 

More propaganda will be from “free maintenance”, and will help to condition the consumer that not much is needed on their car. Why will the consumer believe this? It’s because for the first few years not much WAS done if they went back to the dealer for service.

 

Now let’s add extended oil services into the mix. It wasn’t long ago that our goal for customer retention was to see a customer’s vehicle about 4 to 5 times per year. That was when the accepted oil service interval was anywhere from 3 to 5,000 miles. Take a look at the new car service intervals today; 7,500 to 10,000 will soon be the norm. This will no doubt cause a decrease in car counts and revenue for many shops.

 

In spite of all this, we the independent shop owners have the edge. We were the first to understand that we thrive because we are part of the community. We were the first to understand that our customers come to us because we are genuinely interested in their welfare. There are no ulterior motives at play. We don’t sell new cars and we don’t sell car parts. Rather, we look to extend the life of our customer’s cars and promote preventive maintenance which ultimately lowers the overall cost of owning an automobile.

 

We also understand that our customers come to us because of who we are. People come to us not because of a particular brand name. This is our greatest strength. It must drive new car dealer’s nuts that we can be so successful without any brand name like Toyota, Ford or GM hanging over our bays. Yes, this is our greatest attribute. We survive and thrive because of who we are.

 

The new car dealers are coming after our business. That’s a fact and we all know it. Those of you who don’t heed the warning will be in trouble. This is my fear. Those of you who continue doing business the same way you did yesterday will also be in trouble. Earlier I spoke of the thinning of the heard. I am afraid that this may also happen with many of our colleagues if we don’t plan and prepare today.

 

Never forget that it’s you who will make the difference. If you’ve gotten this far with all that has happened the last few years, my bet is on you. See you in the future!

 

 

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[Gonzo]

I see what your saying Joe. And, it's a very likely scenario. What can we do to combat the "total care" or "free maintenance" issues? I wish I knew.... Hopefully, things like customer loyalty still has some clout. I would think most of my customers that I have been serving for years that would go out and buy a brand new car would only go to the dealer until it wasn't free for them. That might take me out of the loop for a while, but I think it would all turn back to the independent shops sooner or later.

 

Price still drives sales, and repairs. If it wasn't free... they would be at my door looking to save a buck.

[Jeff]

FREE...What a big impact such a small word can have. I personally believe that it will dip for a while. Then after a bit the consumer will realize nothing is FREE! There is no value in FREE. Having been a dealership tech for many many moons I don't believe it will work in the long term simply because the techs will not work for FREE. Anywhere I ever worked that offered these types of programs it was worked off the techs time, in reduced flag time. The managers painted a rosy picture of up sells and returning customers that never materialized. If we continue to follow our business models of honesty and integrity even those that buy the new cars will continue to be our customers. The dealers are banking on selling those brakes and filters and flushes but our LOYAL customers will thank them for the advice and call us for the appointment. Of course the trade in's will be worked back into the system and we will continue to see those same cars with smiling new faces behind the wheel. Just my $3.28 (2 cents after recession and inflation).

[Joe Marconi]

FREE is hard to refuse, or should I say "Perceived Free". I agree, nothing is really free and in the end the customer will pay for it. But just like many other sales tactics, the consumer has to go thru this free cycle until consumer realize the truth. In the meantime, stay the course. There are a lot of cars out there and there will always be market for those of us who understand that what we do cannot be duplicated by a new car dealership.

 

Take care of your customers and take care and be part of the community. The dealers are not in the community like we are, let's compete on our strenghts.

[LynxStarAuto]

As long as Mercedes, BMW, and VAG continue to make cars, I will continue to have work. None of these dealer service plans are truly "free". The cost is built into the vehicle price. The coverage is also very lean, and laden with asterisks, and side notes. About the only thing that is covered is oil changes and wiper blades, and inspections. The wear and tear stuff must be paid out of pocket by the consumer. That is where we still hold the edge, when you consider dealer labor times, and parts costs. They just cannot compete in that department.

 

I agree that we must rethink our marketing. We must show customers that we are just as equipped and prepared as the dealership at half the cost in most cases. We may need to invest in new equipment, maybe do some "spring cleaning" around the shop and clean up the appearance and layout. Maybe the next time you offer to buy that clean vehicle off of your customer that requires a new transmission, instead of reselling it, maybe you can make it a loaner car you give out to customers for repairs that require significant down time. Maybe you can invest in new equipment which will boost your efficiency and productivity. There are many ways to go about it, but the indy shop is not going anywhere. There will always be used cars, and used car customers on the road, and those cars will need service, and that is where we come in.