As originally appeared in Autosphere on July 27, 2022.
Today, used vehicles remain a hot commodity. Dealers are looking to get their hands on all the inventory they can and in some cases; three and four-year-old used vehicles are still selling for as much as they cost new.
Savvy dealers recognize that the real opportunities can be found in those low-mileage, well-maintained used vehicles. Yet how can dealers help ensure a ready supply of these kinds of cars and trucks in a market that is starved for inventory?
One way is by leveraging the power of F&I through products such as extended warranties, pre-paid maintenance, and vehicle protection plans. Jake Stacey, Executive Vice President of Sales and Training, LGM Financial Services poses an interesting point. “As a dealer, would I rather bring back a vehicle I know, knowing the person that’s driving it, and the protection products that are on it, or take my chances at an auction?”
Needs analysis
Stacey says that successful dealers, with highly successful Financial Services Managers, can, by conducting an effective needs analysis with a customer purchasing a new vehicle, ensure a ready supply of clean, desirable well-maintained used vehicles 2-3 years down the road by leveraging F&I as a tool to properly maintain both the vehicle and the relationship with the customer.
Stacey believes the key to making this happen is by ensuring dealers are “doing the right thing for their customers,” in other words, by offering well-designed customer-centric F&I products that provide benefits not only today but also in the future. Companies like LGM provide dealers with a great opportunity to do this via offering items such as retention and loyalty credits, which allow customers to transfer from one vehicle to the next without penalty. Flexible terms like this work in favour of the customer and create loyalty and retention for the dealer. “If dealers can play their cards [and cars] right, they can potentially control as much as 40% of their future used inventory this way,” says Stacey. The result gives them a huge advantage in a market where reasonably priced, high-quality used vehicles at the auctions can often be hard to come by.
Another way of driving value for used vehicles through F&I is via appearance and cosmetic protection coverage. “Products such as paint and rust protection are great for not only the customer but also the dealer to drive repeat business back to their service bays,” explains Jill Kleovoulos, Director of Marketing, Ancillary Products, iA Dealer Services. “With inventory levels at an all-time low, dealers who are looking to buy back popular vehicles can target those that have these products applied and re-sell them with confidence—knowing that they are protected and ready to re-enter the market.”
Electric vehicles
Steve Holmes, Vice President at the Myers Automotive Group in Ottawa, Ont., notes that given the current interest and discussion around electric vehicles, as well as projected growth in sales and service in this segment, extended warranties and maintenance plans will likely prove even more critical, especially when it comes to suspension, alignments, and brake servicing.
Holmes says it is also likely we will see a shift in terms of component repairs and replacement and away from some of the traditional parts, particularly related to powertrain. A lot more of the emphasis is expected to be on electronic updates and servicing, along with battery repairs versus battery replacement. “Because you aren’t going to have as many traditional wear and tear parts, warranty claims might actually decrease because it is more of a plug and play scenario.”
