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Dealerships must gear up for 59-plate change

Dealers must try to turn every lead and chance showroom visit into a sale in September, the only plate change month that will get a boost from the current
scrappage scheme.

In July, the SMMT estimated September’s new car market at 338,600.

Now it believes the total could be slightly higher because of the success of the £2,000 ‘banger boost’.

But selling new cars is only part of the September market.

Dealers need a plan to ensure the best ways of upselling and how to make the biggest profits from cars taken in part-exchange.

Each year, in both plate-change months, sales of new cars outstrip the rest of the year.

This gives dealers a chance to sell more finance and insurance products and this can provide a reason to keep in touch with customers.

Angela Barrow, operations director at service plan provider EMaC, said: “Dealers should see September as the first step in an ongoing business relationship.

“Over the past 18 months more dealers have recognised that retaining customers saves marketing costs and increases income.

"Service plans for both new and used cars are an opportunity to boost long-term profit.”

She said EMaC’s latest research showed seven in 10 dealers saw the key benefit of service plans as customer retention.

Of those interviewed, 45% reported a year-on-year rise in sales of service plans to buyers of new cars, and 61% on purchases of used cars.

Felix Serrano, managing director of MSX International, which advises dealers on winning and keeping customers, said: “No one should assume someone walking into a showroom is merely a tyre kicker.

"The assumption must be they are interested in buying a car – the dealership team should convey the message ‘we’re here to look after you’.”
There are opportunities too for add-on sales in September, said Tim Heavisides, Car Care Plan chief executive.

His group’s sales of extended warranties and GAP insurance are 30% up on last year.

“People buying cars are looking for cover to eliminate the risk of big repair bills sometime in the future,” he said. “Because future valuations are volatile, they can be sold GAP policies.”

Point of sale now consistently accounts for more than 50% of finance for new cars.

Black Horse managing director Chris Sutton said: “F&I profits can go a long way to off-setting the lower volume sales dealers have been experiencing over the last 12 months.

“Dealers should ensure their sales staff receive the necessary training in order to be able to maximise these opportunities. Prominent point-of-sale material for trusted brands can give customers extra confidence.”

Colin Bruder, managing director of the Network Automotive consultancy, urged dealers not to be complacent if sales of 59-plate cars in September went well with the help of the scrappage incentive.

“The good times aren’t back,” said Bruder. “This is the time to get back to basics before the autumn and winter when VAT is due to return to 17.5% and other taxes might be coming.”

Bruder said all dealers should now be enlarging their customer bases and working hard at retaining those who spent money with the business.

“It’s all about looking after people by rewarding them,” he said.

“People who buy cars have sons and lovers, and will need vehicles repaired or services. It’s up to dealers to convince people they will look after a car for as long as a customer keeps it.”

Another profit opportunity comes from the influx of part-exchanges, which in turn attracts a flow of buyers seeking high-value used stock.

Decisions have to be taken on preparing a car for the forecourt or disposing of it through an auction.

Profits from part-exchanges after plate-change sales will be a key factor in September.

BCA UK operations director Simon Henstock said: “Dealers should use auctions as a bring and buy, selling forecourt stickers and part-exchange vehicles while stocking up with ready-to-retail models to take their place.

“They should concentrate their teams on making retail sales and let auctions take care of the vehicles that don’t fit the bill, unleashing the money tied up in the metal.”

BCA’s latest data shows part-exchange values have increased for seven months running. In July, the average price rose by £136 to £2,541 – the highest price recorded since September 2007.

Alan Senior, HPI valuations spokesman, said the decision whether to send cars to auction for quick disposal, or sell as part-exchange bargains, was a burning question for many dealers.

“Many smaller switched-on dealers have always sold part-exchange cars through their own channels, whatever the trading conditions,” said Senior.

“This maximises profit. The current high demand for clean stock could be damaging profit margins for dealers that stick to non-flexible disposal methods.

“The larger dealer groups are often guilty of this approach just to satisfy their accountants.”

Virtual warehouse saves money

PareX, which builds virtual parts warehouses for franchised dealer networks, says it can save them money if repair work is needed on September part-exchanges.

“We also save time for dealers when they need a part that is not readily available,” said director Joost Kramer, whose company is based in the Netherlands.

PareX operates for dealers in 25 European countries with the objective of minimising time off road for cars needing repairs.

“PareX is rather like an automotive eBay,” said Kramer.

“Many dealers will be storing parts that are obsolete or rarely required – we give them the chance to turn them into money.”

The system works by creating a virtual parts warehouse for a brand. Dealers linked to PareX can see each other’s stock lists and soon find a part that is urgently required.

“Franchised dealers’ manufacturers can provide most parts, but not all,” said Kramer. “Their supply rates vary, but typically can’t supply between 2% and 5% of parts ordered.”

Kramer said PareX did not operate as a rival to carmakers.

“We divide parts into current, obsolete and scrap and keep everything simple for our customers,” he said.

“That way, dealers with us can keep their customers happy with a speedier repair service.”

Gear warranties to customers' needs

Mondial Assistance is working closely with dealers and manufacturers to provide warranty services geared to each customer’s needs.

The objective is long-term business retention.

Liz Grindell, Mondial Assistance UK warranty manager, said: “There has been a 22% year-on-year increase in dealers offering a free three-month warranty on older used cars.

“If a manufacturer can deliver the right level of comprehensive cover that encompasses excellent support when the customer needs it most, they should secure high levels of retention to see them through the recession.”

Grindell said that with margins squeezed, many manufacturers and dealers were looking to add value while seizing revenue opportunities.

Traditionally, a 12-month warranty has been offered as part of an approved used car programme.

Now, Mondial is working with manufacturers and dealers to provide a comprehensive warranty package that provides cover for customers for a shorter time.

“This allows dealers to offer customers an attractive deal on older vehicle stock that they may have previously shied away from promoting,” she said.

“Boosting older used car sales volume will generate interest in younger makes and models by increasing forecourt traffic.

"This reduces dealer resale costs and creates opportunities to increase revenue by selling on an extended warranty package.”



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