Don’t use the success of the past to address the challenges of the future of car dealerships. Innovative tools and strategies for a changing market.
Recently, the automotive industry has undergone considerable changes and the economic shifts in 2022 have set the stage for automotive dealerships to focus on new opportunities and challenges in the coming year. Changes triggered by the pandemic, such as limited inventory, increasing interest rates, and inflation, have impacted both dealerships and consumers. It is evident that dealerships are not immune to economic fluctuations and that there is no single-solution approach to address the whims of the market. The importance of preparing for what’s next cannot be stressed enough. Failing to plan is planning to fail. Therefore, now more than ever, strong partnerships, strategic planning, and modern technology can help lay the foundation for sustainable profitability and success for automotive dealerships as we head into 2023.
When confronted with market volatility involving electric vehicles, attacks on traditional dealership franchise models, and new regulations, it’s crucial to reassess your strategies, tech integrations, and partners. Regardless of market conditions, there are strategies and practical approaches that can help you boost your profitability and futureproof your dealership.
1. Optimize your marketing spend
Competition remains a constant challenge in the automotive industry. In the competitive market, an AI-based marketing tool would allow you to lower your marketing spending and target your marketing efforts more effectively, resulting in higher conversion rates and increased sales.
The internet has become a key source of information for car buyers, who spend weeks or months researching the right vehicle. Most people use online resources to research vehicles, compare prices, and read reviews before heading to a dealership. By providing dealerships with valuable insights such as shoppers’ motivation to buy, days in the market, and buyers’ details, an AI marketing tool could help dealerships streamline their marketing efforts, improve their bottom line, and better compete in the marketplace. Find out more about the tool here.
2. Creating vehicle affordability is a win-win
Dealerships must differentiate themselves from the competition. Vehicle affordability can be a challenge for many car shoppers, particularly in today’s economy. Shoppers could easily slip out of the sales process if they cannot find an affordable vehicle in your dealership. Hence, a bi-weekly payment tool helps you re-engage shoppers by assisting them in paying down loan principal much faster, equating to the quicker building of equity for them. It is a tried-and-tested method that has been used on home mortgages for years. Finally, it is available and just in time for consumers seeking auto loans. The payment tool could help you create a unique differentiator, enhance customer experience, and improve cash flow. Learn more about how it can be a win-win for you and your customers.
3.Unlocking additional profit centers with F&I solutions
F&I solutions, protection products, and participation programs have long been vital contributors to the economic success of dealerships, even prior to the pandemic. Now, more than ever, the role of the F&I department in terms of profitability and customer protection is undeniable. The average age of light vehicles in the U.S. reached an all-time high in 2022 as consumers continue to hold onto vehicles. In addition, the sale of used cars with high miles means more consumers would need vehicle protection plans to keep older-model and even gently used vehicles in top shape after purchase. Additionally, with continued pressure on the finance reserve, refining your F&I product offerings is the key to maintaining profits. Although this may seem obvious, many dealerships fail to achieve this goal. Without presenting customers with all their options, you can’t expect them to make informed decisions and make purchases.
Vehicle service contracts (VSC) and other F&I products can protect customers against inflation and the high cost of repairs and replacements. As prices rise and the cost of parts and labor increases, customers can save money by locking in the current rate with an F&I product. To emphasize, these products can provide peace of mind and financial security for customers needing to use them a few years later when parts fail or malfunction
PRO Tip: If a customer can’t afford an F&I product, they can’t afford to take the risk of paying for expensive repairs or replacements out of pocket. Enrolling in an F&I product is a wise financial decision that can provide long-term protection and savings.
4. Avoiding the risks and prioritizing ethical practices for a secure future of car dealerships
Regulators are aggressively monitoring the market and have indicated that they are on the lookout for any questionable approaches. Unethical and questionable practices in your dealership could put your business at risk. A fine from a regulator such as Federal Trade Commission (FTC) or The Consumer Financial Protection Bureau (CFPB) can erase any profit you might have made on a questionable deal and put you in debt. Furthermore, it can also harm your reputation as a customer-friendly and responsible business impacting the future of your car dealerships.
In these uncertain times, it’s essential for automotive dealerships to take steps to protect their businesses, reputations, and employees. Knowing that regulators are looking for questionable practices can help you avoid costly mistakes. It’s never worth risking noncompliance for the sake of a single sale.
5. Offerings for high-tech vehicles’ electronic components
As manufacturers shift to meet the demand for EVs and offer incentives like free maintenance and extended powertrain warranties, customers need affordable ways to cover the many components excluded from factory warranties. Quantum electronic component coverage provides a cost-effective solution for protecting the expensive technologies and electronics in modern vehicles. Therefore, by providing customers with this coverage, dealers can increase service retention, drive higher revenue, and save their customers from paying expensive repair and replacement bills.
6. Strong partnerships with industry pros for successful future of car dealerships
Having strategic partners and industry professionals on your side can make all the difference in the constantly changing automotive industry. A strong partner understands that dealership success goes beyond just having the right products and services. Their wealth of experience enables them to anticipate market shifts and provide tailored solutions to help dealerships navigate the constantly evolving market.
That’s where we can help. As your partner, we add value to your dealership. By keeping an eye on the market, we develop strategies to help you succeed. Our industry experience and historical perspective enable us to identify opportunities and offer solutions to help dealerships thrive.
We also partner with dealerships to manage expense versus profitability. This means finding the right people for the job, training them properly, and creating a compensation plan that rewards productivity. By being more than just a vendor, we’re able to help dealerships navigate the headwinds and succeed in today’s market.
No matter how the market changes, expanding your F&I offerings, utilizing advanced technology, and partnering with the skilled and experienced auto industry consultants would significantly support creating opportunities to optimize the revenue sources and build successful future of car dealerships.
PRO can support your dealership’s profitability and offer strategic planning for a productive year ahead. Contact us today to see how we can be your partner in success.