By Marilou Vroman, CPA, CFE
As supply chain constraints continue to put pressure on vehicle inventory days’ supply, dealers are realizing strong margins on the sales of both new and pre-owned inventory. Who would have thought we would ever see the day of an addendum sticker raising the selling price of a new Kia to well over MSRP? This is truly a sign of unusual times.
The forces of basic economics are at play with the perfect storm of limited supply and high demand creating high prices and newfound means to hold gross. However, you certainly cannot sell from empty shelves and while many OEMs continue to see new vehicle production challenges, dealers have an opportunity to get creative in sourcing pre-owned inventory to meet increased demand. Traditional means of obtaining inventory through trade-ins, lease buyouts and auctions are simply not enough. Why compete with others to get vehicles for stock when you have a captive audience right in the service drive?
When you sell a vehicle to a customer, one typical part of the sales process is to introduce your customer to the service department to encourage return visits and build loyalty to the dealership after the sale is complete. But how often does the converse scenario apply? Not often enough. When a service customer comes into the drive, how often is there interaction with a member of the vehicle sales department? Every day your shop is open, customers bring in vehicles with great potential to be converted into future pre-owned inventory. The magic happens when you know what inventory you would like to acquire, and the customer who owns the target vehicle sees value in upgrading the vehicle they already have. Through heightened awareness of the need for inventory, and implementing a customer conversion process, this magic could happen every day. No auction fees, no transporting, and the car is already teed up in the drive for reconditioning.
Here are a few suggestions to get started:
Identify your ideal pre-owned inventory characteristics and communicate these attributes to both sales and service personnel.
Know your customers; observe and listen to their automotive needs and lifestyle. Offer them realistic and seamless solutions to these needs.
Raise awareness of service personnel of product offerings and attractive sales programs.
Review upcoming service appointments to identify target vehicles and customers for potential upgrade.
Genuinely engage customers in the service department and express interest in their vehicle.
Offer a no obligation appraisal of a customer’s vehicle while the vehicle is in the service drive.
Contrast the cost to repair the customer’s existing vehicle to an investment in a better one.
Reward service personnel for the successful conversion of their customers to vehicle buyers.
As we ride the wave of the perfect high PVR storm, it is time to capitalize on inventory opportunities from all sources. Implement creative ways to source the right inventory now to keep your customers in your dealership’s sales cycle. When the current wave of supply constraints subsides and eventually reaches the shore, you will have the force of your dealership’s creative momentum to keep the PVR cycle going.