Sales are going to suffer greatly for dealerships that haven’t mastered their trade-in appraisal process and CRM skills. The legacy of the downward spiral of leasing in 2007-2009 is that now, more than ever, consumers own their cars. To keep sales volumes up dealers need to get smart about how to identify these vehicle owners and offer them appealing trade-in solutions that help get them out of their current vehicle and into another one.

What happened that changed the game so drastically?

During the financial crisis in 2008/2009, brands like GM and Chrysler stopped leasing vehicles all together. Most other brands focused heavily on promoting finance and cash purchases instead of leasing.

A study by DesRosiers Automotive Consultants, Structure of the Canadian Retail Finance Market – New Light Vehicles, identifies how drastic a shift there was between leasing and owning vehicles in Canada. (See graph below.)

Leasing plummeted from a high of 45% in 2005 to an all-time low of 7.1% in 2009. During the same time car ownership skyrocketed from 55% to 92.9%. According to the same DesRosiers study, in 2010 85.3% of consumers still chose to buy, not lease.

 What does this mean to consumers and dealerships?

For the dealership, a lease deal gave a clear cut picture of when the customer would be back into the buying cycle, usually within 3 – 4 years. A dealership knew when to be in touch with the consumer about their next vehicle since the consumer needed to return their leased vehicle to either:

-          hand their leased vehicle back for a new vehicle

-          buy out their lease.

 For the consumer, leasing was a good process as well since it created an easy, predictable transition from one relatively new vehicle to the next.

 For consumers who own their cars, their catch 22 is that although they may love their vehicle, the longer they wait to trade it in, the more its value decreases and the greater the repairs bills.  Consumers who own their vehicle typically take longer to return to the dealership for a new buying cycle since finance terms are usually in the 5-7 yr. range.   There is no obvious trigger to buy again.

The key for both consumers and dealers is to find the right time to trade in that owned vehicle for a new one. 

Dealers are feeling the effects of lease declines now in 2011 and will even more so in 2012/2013 as that bottoming out of leasing works its way through. Now, when so many more consumers own their trades, what can dealers do to maintain their rate of sales?

Here are 8 strategies:

1.       Use your CRM to target customers who may be interested in the new model of their current vehicle. 

2.       Use your CRM to identify prospects and customers who can take advantage of program incentives to buy now.

3.       Use your CRM to determine which customers have models you’d like to have on your lot to sell.  Present them with a buying solution, including their trade-in, for a newer model.

4.       When confirming service appointments or when greeting service customers, be alert to consumers who would be open to considering a new vehicle while they wait rather than pay another repair bill.

5.       Present trade appraisals on a customer facing system to build trust.

6.       Engage the customer in their trade appraisals making sure it makes sense to them.

7.       Become great at marketing used cars so you aren’t afraid to win them.

8.       Measure which sales staff or managers do a good job of presenting trade values and winning trades.  Coach those that do not since they are losing two deals each time they fail; the new car sale and the sale of the trade-in as a used car.

 Now more than ever, winning trades makes sales happen.  It is essential that dealers actively go after trade-ins to thrive in today’s market.

 Source:

DesRosiers Automotive Consultants Inc.