The average age of cars and light trucks in the US rises to 12.1 years. What does it mean for your dealership?
Americans are keeping their vehicles longer
The average age of cars in the US hit a little over 12 years. While the average age of the vehicles has risen steadily over the last 15 years, the trend has accelerated due to a steep decline in new vehicle availability and sales, according to IHS Markit, a leading data and information provider. Improved vehicles quality is another contributing factor. As a result, the consumers are comfortable keeping their cars and trucks longer. Does the rise in average age of cars in the US present a threat or an opportunity for dealerships? The answer depends on how you capitalize on it.
Two decades ago, a car might have changed hands once or twice in 100,000 miles. Nowadays, it is not uncommon for a vehicle to have multiple owners and last for over 200,000 miles. By the time the vehicle reaches its third or fourth owner, there is still meat on the bone.
Furthermore, according to IHS Markit, a decade ago, the average age of vehicles in the US was 10.6 years. In 2002, the average age was 9.6 years. With the economy struggling due to the pandemic and limited and pricey options for new vehicles, the trend is expected to continue. Additionally, the average age will likely be significantly higher than what it was a few years ago.
The big question is, how does this impact dealerships? Is this bad news, good news, or a mixed one?
The answer lies in how you look at it.
From a customer-centric lens, there is a lot you can do in this situation to keep your customers satisfied as they hold on to their vehicles longer. In addition, it would also present you with opportunities to increase your profitability.
Here are some of the strategies you can adopt to help your customers while keeping your profits higher:
1. Ask the right questions
In an inventory situation where customers do not have the options they did, it is critical to ask the right questions to help them find a vehicle that would ease their decision-making.
Asking closed-ended questions would help shorten the buying process and assist customers in choosing a vehicle that best matches their desired one. For example, asking, “are you looking to buy a car in a light or dark color?”
In addition, implementing a choice-close strategy, i.e., asking questions with two options, would keep the interaction positive and the customer happy with control over choice.
2. Create needs awareness
Customers are perceptive, and they can quickly tell if the dealership personnel are helping them or selling them. Significantly, the moment a customer feels heard and understood; buying comes organically. This creates a more fulfilling experience for customers and increases the likelihood that they would recommend your dealership to their friends and family. Therefore, when creating needs awareness, tailor the messaging and product packages to be meaningful to your customer.
For example, if a customer is buying a high mileage used car and low monthly payments are essential to them, creating awareness of products such as appearance protection and high mileage vehicle service contract (VSC) would directly meet their needs. Asking questions in the following manner could help in making customers aware of the need for the product.
- If this vehicle needs to be taken into the shop, do you want to pay for it, or do you want us to pay for it?
- Do you want to pay for all of it or some of it?
Products that add value to your customers and grow your PVR
In the current scenario where the vehicle is held longer, a product that keeps the car looking good longer, like Cilajet/Express Appearance Protection would benefit your customer.
Your customer’s value:
- Long-lasting appearance protection, making it easy to keep clean and shiny
- Provides an additional $500 trade-in value guaranteed at selling dealership
- Performance guaranteed for five years for new cars and three years for used cars
How you sell it:
- Walk your customer through a scenario where Cilajet’s protection would benefit them.
- Educate your customer on the factors that determine the trade-in value
- Brings the customer back to the dealership for repairs
- Available for all vehicle makes
- Protects trade-in value
- High CSI Product promotes repeat and referral business
- Non-Cancelable (no chargebacks)
Another valuable product for a customer purchasing a high mileage vehicles is Essential Enhanced High Mileage Vehicle Service Contract (VSC). It protects the customer from expensive repair costs resulting from the most common malfunctions of high mileage vehicles. Powertrain to exclusionary coverage is available with terms limited by time and miles.
Your customers’ value:
- Coverage for likely repairs
- Roadside assistance up to $100 per occurrence
- Discounted deductibles to return to the selling dealership
- Vehicles that come with guarantees sell at higher prices
- Buyers become repeat customers by returning for service
- Your customers’ high-price repairs are taken care of
3. Present F&I products optimistically:
Joe St. John, Business Development VP, StoneEagle, stated that data through May shows soaring F&I profits. The average F&I profit per vehicle sold in May 2021 was $400 higher per unit than in May 2019. Moreover, the sales of F&I products per purchase have also increased. StoneEagle data also shows that consumers now buy 1.49 products per vehicle, up from 1.23 in 2019.
This shows that consumers have a lower risk tolerance than in the pre-pandemic era and they want to be in a favorable position when the unexpected happens. Therefore, offer F&I options with conviction to help consumers offset the risks.
Overall, the way consumers buy has drastically shifted in addition to the average age of cars in the US. Adapting your dealership to accommodate these changes will keep you fluid and robust. We have been providing profit-enhancing strategies for over three decades. Reach out to us today to learn how we can provide you with tailored solutions for your dealership.