With the recent advancements in today’s new cars, vehicle-ownership periods are lengthening, leaving many people out of the market for a new car. During the first three months in 2015, the average length of new car ownership was 77.8 months, which is more than 2006’s first quarter average. The used-vehicle ownership period has also increased with the average being 63 months, almost doubling the 2006 average.
Despite these lengthened ownership periods, a survey from AutoAlert showed that more than two-thirds of customers said they want to be notified by dealers when they can upgrade their vehicle with no change in their monthly payment. Also, over fifty percent would like to be informed about key points in their vehicle ownership, like when their warranty expires. This leads to new F&I opportunities long after the customer visited your dealership the first time.
The Customer/Dealer Benefit
Over time, long-term vehicle ownership is good for both consumers and dealers. When the vehicle ownership period reaches a certain point, customers will shed their negative-equity position, resulting in true positive equity on the vehicle. Since their vehicle’s value begins to depreciate on the first day of ownership, the customer will commonly owe more than the vehicle’s worth, depending on the amount of their down payments or trade equity.
As dealers know, if the customer trades the vehicle in too soon, they will have to pay to get out of the loan. When they keep their vehicle for longer, their loan will go down in value, leading the vehicle to be worth more than the loan. Customers who participate in long-term vehicle ownership are more likely to add an F&I product for their vehicle than people who trade in their vehicles every three to four years. Because of this, dealers can sell more VSCs with extended ownership. It’s a win-win for both parties.
Update the Customers
AutoAlert conducted a study that evaluated customer motivation to trade in their vehicles versus holding onto them and how consumers wanted to be notified about vehicle upgrade eligibility. The results were that 69 percent of participants felt that it was “very important or somewhat important” for their dealership to contact them when they are eligible to upgrade their vehicle if it doesn’t impact their monthly payment. Clearly, dealers need to keep tabs on customer data so they can eventually offer updates to their customers in support of another deal. This type of engagement with consumers is where dealerships are finding a great return on investment and stronger loyalty with customers.
It is a smart business practice to monitor customers’ trade-in times and contact customers before they’re necessarily looking to buy another car. Over the last few years, the F&I menu has grown. This means when a long-term vehicle owner comes back to the market, you can show them more products than they had seen previously.
For 2016, start tracking your customer’s data and stay on top of updating them about new opportunities. You’ll build rapport, customer loyalty and revenue all at once. Let this New Year be your store’s most successful!