Article

Using Innovation To Give You An Edge

March 2007, Auto Dealer Today - WebXclusive

by Mark O'Neil - Also by this author

At the recent 2006 Innovation Conference, attendees explored industry trends and how technology can give dealers a competitive edge in today’s increasingly competitive environment.

Three important trends – online research, digital contracting and leasing – were discussed between top dealers, lenders and technology partners. 

Innovation Trend #1: Internet walk ups increase

Our industry is changing and just one example of this is how quickly online research and shopping is expanding. Not only does the Internet economy surround us, but it is creating a complex universe of business challenges and opportunities that didn’t exist 10, five or even two years ago.

Given the growing number of car shoppers who leverage the Internet during the car buying process, it’s fair to ask one simple question: How should dealers respond?

Dealers should invest in online technology to not only drive customers to their Web sites but also to ensure their sites include updated information, online versions of offline advertisements and helpful tools to assist car buyers in making an informed decision.  This includes online credit applications and even a way for potential buyers to do a “first pencil” before they ever set foot on your lot.

When consumers shop for financing prior to arriving at your dealership, they are very serious. They are coming out and saying, “I already know a lot, so tell me something I don’t know.” This is the chance for your Internet, BDC or finance manager to give that customer information about the vehicle, your inventory, aftermarket products and how your dealership is different from every other dealership.

Any sales person can ask an Internet customer to visit the showroom and then roll the dice. But, a sales consultant who knows how Internet shoppers tick will become an indispensable resource for a future car buyer to complete their analysis.

Innovation Trend #2: e-contracting eliminates cash flow headaches

Dealers are reaping the benefits of e-contracting.  For Rob Isakson of Isakson Motor Sales, e-contracting translates into better cash flow and high customer satisfaction.

“Like most dealerships, we’re constantly concerned about cash flow. In the old days, it could take five or 10 days before a deal was funded. With e-contracting, the deals are funded within hours,” said Isakson. “With today’s market and interest rates, that’s a major competitive advantage.”

Because e-contracting also eliminates most errors that can delay a deal, Isakson’s customers are happier and more satisfied from the get-go. Achieving high customer satisfaction is a major goal at Isakson Motor Sales, a 77-year-old Chrysler dealership in Hobart, Ind.

“Believe me, customers are far happier when they only have to sign once,” says Isakson. “With e-contracting, we go through all the details with the customer in advance, so there are fewer questions or complaints later on.”

“We really strive to be number one in customer satisfaction because it gives us a sustainable competitive advantage,” says Isakson. “E-contracting helps us improve customer satisfaction by eliminating most of the annoyances and irritations that make people uncomfortable. We’re not the biggest dealership, but we do everything we can to keep our customers happy. E-contracting is a crucial piece of our customer satisfaction strategy.”

Innovation Trend #3: Leasing is here to stay

Compelling data shows impressive leasing growth – a trend that is here to stay. As it continues to grow, leasing should play an important role in how your dealership does business in the months ahead.

Given the MSRP of most vehicles today, only a few buyers can comfortably fit monthly retail payments into their budgets. Additionally, an increasing number of owners have negative equity in their trades, so they struggle to make a down payment on their next vehicle.

Given these conditions, only leasing offers a sales technique whereby your dealership can put a qualified consumer into a $34,000 vehicle for as little as $400 a month, often with little or no money down.  By comparison, the monthly retail finance payments on that same vehicle with zero percent down would render a monthly payment of almost $1,000.

Many front-line managers and sales consultants are skeptical of leasing, even though the lower consumer cost would make it easier to move more units per month. Why? Leasing is not as lucrative as retail and therefore tends to be downplayed.

Chris Saraceno, vice president of operations for the multi-state, multi-dealership Pennsylvania-based Kelly Management Corp., said that in the group’s stores, everyone had better get excited about leasing because leasing allows dealerships to meet their unit sales goals, profit from manufacturer incentives and reduce their floorplan costs.

Pete Shaheen, a 35-year leasing manager at George Waikem Ford, Massillon, Ohio said, “If a dealership is not heavy into leasing, it is just not going to be competitive.”

When looking at the long-term benefits of leasing for your dealership, leasing makes sense to ensure your security. Consider the perspective of Larry Merriam, president, Key Auto Group, Inc., a seven-store operation headquartered in Bridgeport, Conn.: ”There is a definite difference in the total gross between a lease and finance deal.  The lease is probably about $500 less on average.  That's because there is no finance reserve on a lease and it is harder to sell an extended warranty.”

Merriam added, “But the lease has a distinct advantage which I am willing to trade off for the $500 difference.  The lease customer has to return the car to the dealership, and if you’re smart about it you will solicit the customer several months before the lease expiration for a new lease.  The repeat percentage is much higher.”

Unlike typical retail deals, which today have terms that stretch beyond 60 months, most lease terms last between 24 and 36 months. Leased-vehicle customers return to the market sooner, and this brings the buying cycle closer to a two-and-a-half year trend. This means customers will return to your dealership much sooner than the traditional retail customer.

Now is the time to reinvest in creating a leasing culture that includes tools to facilitate the process.  Aggressive dealers and leasing experts agree that dealership personnel should present lease options as enthusiastically as they present four-square retail options.  Technology will help to make the presentation accurate, while finding the most profitable option for your dealership.

When lease options are presented using technology to ensure professionalism, accuracy and confidence, customers will understand how leasing can help them achieve their dream – a new car in the driveway every few years.  And dealers will increase customer loyalty and profitability in the process.

Vol 4, Issue 1

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