October 23, 2023
The total cost of car ownership is on the rise. Here’s how you can turn it into an opportunity to help your customers.
According to Edmunds, the average monthly payment on a new vehicle in Q3 of 2023 was $736, an all-time high. Nearly twenty percent of consumers are paying $1,000 or more per month on their new vehicle. Given all this, Cox Automotive’s lead economist, Jonathan Smoke, says a full fifty percent of car buyers are priced out of the market right now. Add to that the push toward EVs, which are generally more expensive than their gas-powered equivalents, and you have a recipe for a concerning trend in the automotive industry. While interest rates may have peaked, this affordability crisis isn’t going away anytime soon.
Forward-looking dealers are reevaluating processes to help customers get into the cars they need. But what exactly are they doing? In our conversations with dealers, we’ve found that they are:
- Prioritizing the customer experience. While getting the customer into a car is the number one goal, experience is becoming more and more important. Dealers are seeking the tools that will help them better serve their customers and generate long-term loyalty. They are also making it clear to the customer that they’ll turn over every rock to help them find savings, including giving them a reasonable offer on their trade-in and working with the bank to get the best possible rate for them. While selling to the customer that day is the ideal outcome, these dealers are focused on the overall relationship and know that a good experience can earn them a future customer.
- Offering the right F&I products. While you can expect that some customers may no longer have the budget for back-end products, there are plenty who see the value in them (in fact, according to JM&A, sales of F&I products are on the rise, recovering from their 2022 declines). Dealers we spoke with are using the higher service and repair costs, particularly on EV’s, as a talking point to show car buyers the value of VSC and pre-paid maintenance. According to AAA, the cost of maintenance and repairs increased 2% year over year; the cost of repairing an EV is about $963 higher than its ICE counterpart. The right F&I package could save customers from large bills in the future; some dealers are seeing the higher prices as an opportunity and selling point.
- Using an embedded auto insurance provider with multiple carrier options. Auto insurance is a key piece of the total cost of car ownership, yet many car buyers don’t think to shop their policy around when they are buying a new vehicle. But an embedded solution that acts as a marketplace is a special tool for dealers to use that also benefits the customer. Just like most things, when a consumer has access to more options, they are more likely to save money. In this case, a customer may find better options by comparing rates in just a few minutes while at the dealership. This may yield a lower monthly payment versus just adding their new car to their old policy. Those savings could save a deal, or open up the customer’s budget to afford an additional F&I product.
In anticipation of selling fewer cars, dealers are using this time to think about alternate forms of income. They are asking themselves if they own every part of the purchase process yet. They’re doing a deep examination: are they really owning the dealership’s brand, their customers’ experience, and all the ways they could be earning?
They recognize that just as they should be turning over every rock to help the customer save money, they should also be turning over every rock to uncover new income sources. Some are considering entering the world of re-insurance or creating a licensed entity and earning a percentage of the premium of all auto insurance policies sold to your customers.
If you’re interested in the latter, Polly can help walk you through your potential earnings and the steps you can take to get there. Schedule your free insurance consultation today.
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