A Big Win for Dealers and Customers
In the ever-innovating automotive marketplace, auto dealers face a unique challenge: catering to the growing segment of consumers who purchase older, high-mileage vehicles off their lots. In 2023, the average age of cars and light trucks reached an unprecedented 12½ years, with over 36 million vehicles between 12 and 15 years traveling on U.S. roads, according to S&P Global Mobility. This trend, which has been driven by factors such as high interest rates and economic considerations, has led many customers to opt for used vehicles, emphasizing the need for reliable protection coverage. Today, high-mileage vehicle protection-coverage products emerge as a crucial solution, not only meeting customer needs but also enhancing dealer profitability and customer retention.
Meeting Customer Needs and Expectations
With original manufacturer warranties long expired for older, high-mileage vehicles, customers are increasingly looking for coverage options that ensure their cars continue to operate for longer periods, and the ability to budget for any mechanical issues accordingly. This shift in consumer behavior presents a significant opportunity for automotive dealers. By offering high-mileage vehicle service contracts, dealers can provide customers with the peace of mind that comes from knowing their used vehicle is covered against unexpected repairs.
Enhancing Dealer Profitability
Integrating high-mileage vehicle service contracts into their product offerings allows dealers to tap into an additional revenue stream that has a high growth trajectory. These plans not only contribute to initial profit margins but also play a pivotal role in service drive retention. When customers return to the dealership for repairs covered under their protection plans, it generates additional revenue and repeat business, bolstering the dealer’s bottom line.
Boosting Customer Retention
Historically, customer retention has been a challenge for dealerships, with many buyers turning to private repair shops for post-warranty services. However, offering premier extended-care vehicle service contracts can effectively tackle this issue. Such plans incentivize customers to continue using dealership services, fostering a long-term relationship that benefits both parties. This ongoing engagement not only increases customer loyalty but also enhances the dealership's reputation as a reliable service provider.
Adapting to Automotive Market Trends
The increasing average age of vehicles on the road is a clear indicator of a market shift toward older, used vehicles. Dealers who recognize and adapt to this trend by offering relevant protection products are likely to fare better in the competitive landscape. By aligning their offerings with customer preferences and needs, dealers can position themselves as customer-centric, forward-thinking businesses.
This rise in the number of older vehicles on the road represents a significant change in consumer behavior, and again, presents an opportunity for auto dealers to enhance profitability and customer retention. Dealers who embrace this trend and offer comprehensive protection plans will not only meet customer demands but also secure a competitive edge in the automotive industry.
New, reliable high-mileage products are currently available. Selecting the right products and services for your dealership is crucial in adapting to this evolving market environment. The right products and services not only ensure customer satisfaction but also reinforce your dealership's reputation for quality and reliability. This approach helps in building long-term customer relationships, as clients are more likely to return to a dealership that understands and meets their specific needs. Ultimately, the strategic selection of products and services tailored to your customer demographic can significantly enhance both the dealership's market presence and its bottom line.
Lance LaCoe is CEO and president of CARS Protection Plus. He has more than 25 years of automotive industry experience.
EDITOR'S NOTE: This article was authored and edited according to F&I and Showroom editorial standards and style. Opinions expressed may not reflect that of the publication.
