‘Car Buyer Journey’ may offer a route to better store results

050118 IL ‘Car Buyer Journey’ may offer a route to better store results

How well do you know your prospective customers?

Your answer to that question can help determine how successful your business is.

A recent survey, Car Buyer Journey 2018, conducted by IHS Markit and commissioned by Cox Automotive should help steer you in the right direction.

The detailed survey of 2,050 consumers who purchased or leased a vehicle during a recent 12-month period includes findings about:

  • Shopper’s body and mind when beginning the journey.
  • Shopping behavior before visiting a dealership.
  • Point of first contact and buying behavior.
  • How the journey ends for buyers and dealerships.

Each step in the journey provides dealerships with opportunities to boost their business.

State of mind matters

Shoppers overall are spending less time in-market.

But it still takes them almost four months – 108 days to be precise – to make a decision. And that’s about the same amount of time whether they’re buying used or new.

Shopping is driven by buyer need versus want.

Nearly two-thirds of used-vehicle buyers (64 percent) and more than half of new-vehicle buyers (54 percent) are in the market because they need a vehicle. Overall, 61 percent of buyers are shopping out of need while 39 percent are shopping simply out of a desire to purchase another vehicle.

Most car buyers are undecided at the start of the shopping process.

More than six in 10 new-vehicle shoppers don’t know exactly the vehicle they want to purchase, while more than seven in 10 used-vehicle shoppers fit that description.

Many buyers are open to both new and used vehicles.

There is a big difference, though, between new- and used-vehicle buyers, with only 40 percent of the former having considered used vehicles and 55 percent of the latter having thought about new.

COX ADVICE: “Many buyers are open to both new and used vehicles … (and) while car shoppers can be influenced about what to buy and who to buy from, the time to influence and convert them is online, where they spend the majority of their shopping time making decisions.”

Before dealership visit

Buyers want to know the total price of the vehicle.

Transparency matters, including online. About 82 percent of buyers want to know the total price of the vehicle they are considering or the total price along with monthly payments.

Car buyers spend 60 percent of their time online.

Out of 14.5 hours of vehicle shopping, consumers overall spend nearly nine hours online compared to only three hours in the dealership where they ultimately make their purchase. That total is almost 10 hours for used-vehicle shoppers, who spend nearly 15.5 hours shopping.

Third-party websites are the most-used resource for online car shopping.

Nearly eight in 10 shoppers overall (78 percent) use third-party sites, such as Kelley Blue Book, Edmunds and CarGurus, while just over half (53 percent) use dealership sites.

Buyers most often start at third-party websites.

New-vehicle buyers most often start their search at a third-party website and end at a dealer website, while used-vehicle buyers often start and end at third-party sites.

COX ADVICE: “Dealers should focus on unique ways to deliver a consistent overall message across all sites. It is also critical that dealership websites are user-friendly, compelling, easy to search across all devices and accurately reflect the pricing, incentives, services and amenities that are offered.”

Clues to buying behavior

“Walking in” remains the most-common initial point of contact with dealers.

Despite all the conversation around online chat, texting capability and social media, only about 7 percent of shoppers make their initial contact with a dealership through those channels. The rest make initial contact by other means: walk in (49 percent), phone (26 percent) and email (17 percent).

Buyers going to dealerships where they have previous experience?

Only about three in 10 shoppers buy or lease from dealerships where they have previous experience, although that figure is higher for new-car buyers (40 percent) than used buyers (27 percent).

Buyers did not purchase from the first dealership visited.

Less than one-quarter (23 percent) of shoppers purchased or leased from the first dealer they visited. But that’s not all bad news for first dealerships as you’ll see below.

COX ADVICE: “Dealers should focus on creating a positive in-store experience for shoppers and use stocking and acquisition tools to get the right inventory for their stores.” Shortfalls in those two areas account for more than half of shoppers not purchasing from the first dealership they visit.

How the journey ends

Buyers are shopping around less and are less satisfied with price.

An increasing percentage of shoppers are visiting one dealership before making their vehicle purchase. The downside is that an increasing percentage also is dissatisfied with the price they pay.

Buyers are least satisfied with long purchase process.

Although overall satisfaction with the dealership experience was 71 percent, less than half of shoppers (46 percent) were OK with how long the process takes, with financing and paperwork the main culprits.

Prior awareness is critical to F&I sales.

Purchase of F&I products is much higher among consumers aware of them before a dealer visit, so dealers should offer educational resources on their websites and provide opportunities for consumers to learn more about F&I on their own during the sales process.

COX ADVICE:

“A simple, pressure-free shopping experience, transparent pricing and a set price or non-negotiable price model can help build customer satisfaction … Dealers should strive to shorten the deal-making purchase process – particularly through streamlining F&I paperwork and negotiations – in order to enhance customer satisfaction and improve loyalty and retention rates.”

Of course, these results are generalizations based on consumer responses to the Cox survey, so your dealership’s results and/or experience may be different.

But the results still provide some useful benchmarks against which you can measure your store.

‘Conventional wisdom’ mostly wrong on vehicle ownership, NADA finds

Personal vehicle ownership – and, by extension, automotive dealerships – may go the way of the dinosaurs one day.

But not anytime soon, according to a large-scale research study commissioned by the National Automobile Dealers Association (NADA).

The association wanted to find out “what people really think about [autonomous vehicles], ride-hailing, car-sharing and personal ownership.” The study included consumer focus groups and a national survey about the future of personal transportation.

042618 IL ‘Conventional wisdom’ mostly wrong on vehicle ownership, NADA finds - Copy

“What we found cuts against much of the ‘conventional wisdom,’” reported Peter Welch, NADA president and CEO writing recently on the NADA blog.

Here are the major findings of the study:

  • Car owners have little, if any, interest in giving up their car keys.
  • Cars still are convenient to own, not an “unnecessary purchase.”
  • Millennials aren’t much different than other consumers in their desire to own.
  • People aren’t willing to pay less if they will lose convenience.

“Only 11 percent of car owners in our survey were interested in giving up their personal vehicles to move exclusively toward a ride-hailing service,” Welch said, “even under the assumption that the service was widely accessible, safer and more affordable than human-operated vehicles.”

This was true among all age groups, geographic regions, education and income levels, he added.

“Fully 90 percent of car owners surveyed said that … their car provides them the freedom and flexibility to go where they want, when they want,” wrote Welch.

Survey respondents cited a number of benefits of personal vehicle ownership, including the ability to:

  • Make multiple trips on an errand run.
  • Take an impromptu trip to another city or state.
  • Drive unexpectedly to an emergency room.
  • Leave an event earlier or later than planned.

“If real consumers have anything to say about it, the future of transportation will be built upon the foundation of personally owned vehicles, whether human operated or autonomous,” according to the NADA executive. “Consumers will continue to purchase their own vehicles and use ride-hailing services as a supplement whenever it’s more convenient.”

For more details, see Welch’s report, The future of personal vehicle ownership, on the NADA blog.

Sport Chevrolet

3101 Automobile Blvd.

Silver Spring, MD

 

Dealer principal: Robert Fogarty

General manager: Gibbs Fogarty

Brands represented: Chevrolet

How long in business: 50 years

No. of employees: 108

Annual unit volume (approximate): 2,200

SC Dealer Relationship Manager: Lauren Gallart Bacon

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What makes Sport Chevrolet special:

The family atmosphere, the tenure of our employees, and the owners can always be found here.

DRM Lauren Gallart Bacon’s comment on what makes dealership special:

This dealership is family run and owned. If a customer emails a concern, the owner or GM contacts them almost immediately. The customer service and atmosphere is amazing when you walk into the dealership. They support Santander with all of our programs. They are a current RL dealership, they also did a Direct Mail drop last year and they send 100% of their applications to Santander.

How long has the dealership worked with Santander Consumer USA:

We have been a Santander dealer partner since before it was Santander!

What do you like about doing business with Santander Consumer USA:

We like the ability to do loans for the full credit spectrum. The Extranet makes working deals so much faster and more efficient than having to call buyers at other banks. The Extranet also provides the ability to get deals funded faster by uploading any additional information or stips quickly and easily.

One best practice that contributes to your dealership’s success:

Using the Extranet to structure and maximize every Santander deals profit potential.

Please describe your experience with SC:

We just signed up for RoadLoans and in the first three days set three out of five appointments. We delivered the second lead we received with a $4,279 profit. Every lead we’ve received has responded to our initial contact and wants to buy. Our rep was persistent since I arrived here six months ago, telling us how good the RoadLoans leads are and how she believed the program would benefit our store. She was correct, and we couldn’t be happier that we finally took her advice.

– Kyle Bacon, General Sales Manager

 

GSM Kyle Bacon and Sport Chevrolet are sold on Santander Consumer USA.

GSM Kyle Bacon and Sport Chevrolet are sold on Santander Consumer USA.

6 more of best ways to boost your dealership’s used-car results

How does your used-car operation measure up?

The six key performance indicators (KPI) we shared last week should begin to give you an idea compared to thousands of others, including high performers.

Cox Automotive addressed KPIs in “Metrics That Matter for Best Dealership Performance” in its 2018 Used Car Market Report & Outlook, compiling a list of 12 KPI and best-in-class benchmarks from “vast amounts of data” it collected for the report.

110717 IL Personal touch important, even though car shoppers want digital optionsHere are the six more indicators, according to the Cox research:

Immediate wholesale volume

The best used-car departments “separate the measurements of immediate wholesale, that is, a vehicle never offered for retail from aged wholesale. They look for ways to keep trades … [and] typically have discounted recon rates for older vehicles and few to no packs.” This should be “under 33 percent.”

Immediate wholesale profit/loss per vehicle

“The goal is a small profit/loss per vehicle [about $150], an indication that appraisers are accurately assessing valuations and assumes no inventory adjustments or pack adjustments.”

Aged wholesale loss per vehicle

“Vehicles that were reconditioned and offered for retail but did not sell are likely to lose money.” Top performers separate these “from the ones that were wholesaled immediately and set a KPI for the average wholesale loss on these units. A benchmark of 5 percent wholesale loss allowance is common.”

Appraisal-to-trade ratio

“[This] is the ratio of all vehicles appraised to how many were traded … It is a key indicator of the support the used-car department provides to the new-car department.” It should exceed 50 percent.

Gross return on investment

“GROI is the product of the gross as percentage of the sale multiplied by turn rate. … For a vehicle to make financial sense, the goal is a minimum GROI of 120.” This can be applied to an entire inventory.

Cost to market

“The highest achievers monitor cost to market, which compares the retail value of a vehicle to the total investment in a vehicle, including acquisition cost, reconditioning, transportation, pack, etc. … Minimize costs to enable aggressive acquisition of inventory and deliver maximum ROI.”

For more details, download the 2018 report.

6 of the best ways to boost your dealership’s used-car results

Key performance indicators (KPI).

They are the benchmarks that tell you whether your dealership is on track with used-car sales – or if you have more work to do to get the best possible results.

But which indicators rise to the level of being “key” to your dealership’s sales performance?

Cox Automotive addressed KPIs in “Metrics That Matter for Best Dealership Performance” in its 2018 Used Car Market Report & Outlook.

110717 IL Personal touch important, even though car shoppers want digital optionsBased on “vast amounts of data from thousands of dealers, including the highest performers,” Cox came up with 12 KPIs and best-in-class benchmarks “against which dealers can measure their own performance.”

Here are the first six indicators, according to the Cox research:

Used-to-new ratio

“Used retail unit volume equaling or surpassing new retail volume is a foundational correlation of highly successful used-vehicle departments, assuming the dealership is meeting new-vehicle volume goals.”

A great result is 1.25 used vehicle sales to every one new-vehicle sale.

Inventory turn rate

“The highest performers turn inventory every 20 days … Fast inventory turns maximize high-gross opportunities associated with fresh inventory and drive profits in other dealership departments.”

Price to market/market days supply

“Top performers embrace the balance between a vehicle’s desirability and its price. They use data to dictate when it is appropriate to ‘go for the gross’ and when the window for profit is short … The data is also a foundational element in inventory acquisition and appraisal processes.”

Mechanical and cosmetic reconditioning time

“Top performers solve reconditioning delays … Speed is paramount.”

Reduced reconditioning markup for older vehicles

“Retail reconditioning hinders vehicle acquisition, especially on older vehicles that tend to be some of the most desirable but also have the highest reconditioning costs.”

Packs

“High performers understand the drag that packs place on their used car operations. They slow down acquisition, including reducing new car appraisals.” The Internet has changed this dynamic.

Visit the Inside Lane blog next week for six more KPIs from top-performing dealerships.

For more details, download the 2018 report.

Del Toyota

2945 E. Lincoln Highway

Thorndale, PA

 

Dealer principal: Jack Del

General manager: Jim Lopez

Brands represented: Toyota

How long in business: 38 years

No. of employees: 97

Annual unit volume (approximate): 3,100

SC Dealer Relationship Manager: Brittany Beatty

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What makes Del Toyota special:

We cater to the customer’s individual needs. We focus on creating a seamless, transparent car buying experience. Customer service is our number one priority. We have been serving the area for over 35 years and pride ourselves on repeat business!

DRM Brittany Beatty’s comment on what makes dealership special:

This dealership is special because of their staff, especially the management team. You can tell that they work together and communicate with one another, which helps make their smooth machine work every day! Their success starts from the top down, and with their approachable and down-to-earth personalities, and make-it-work attitude, I can see why they not only made an impression on me, but make great impressions on their customers, which keeps them coming back.

How long working with Santander Consumer USA:

More than 10 years.

What do you like about doing business with Santander Consumer USA:

Santander provides an opportunity for our less-than-perfect-credit-score customers to still receive an awesome car buying experience.

One best practice that contributes to your dealership’s success:

Fast funding and good approvals

Please describe your experience with SC:

  • Fast response time on our submitted applications. Knowing we have a quick approval from Santander helps us make deals with our customers faster, and we don’t have to keep them waiting.
  • Dealer Extranet – We are big fans of the rehash tool. It gives us the flexibility to rehash multiple vehicles in minutes without having to pick up the phone.
  • Funding – We have had great experiences with the funding department. It is fast and painless, which keeps us wanting to work with Santander.
  • Our relationship with our Santander rep, Brittany Beatty, adds the perfect personal touch. In a time where instantaneous accessibility is vital, she is always a phone call away.

– Jim Lopez, General Manager

 

Patrick Donlen, general sales manager, left, and Jim Lopez, general manager, of Del Toyota.

Patrick Donlen, general sales manager, left, and Jim Lopez, general manager, of Del Toyota.

SUV and pickup truck buyers more loyal to segments than car owners

SUV and truck buyers are a loyal breed.

And while that may not be a total surprise, the strength of that loyalty might be.

About three-quarters of SUV owners who purchased a new vehicle last year and about the same percentage of pickup truck owners selected the same type of vehicle, if not the same model or brand, according to Edmunds’ Loyalty Report 2018.

040318 IL SUV and pickup truck buyers more loyal to segments than car owners

SUV owners are most loyal to the growing segment.

Consumer loyalty to SUV models increased for a fifth consecutive year in 2017 and the eighth time in nine years to 75 percent, while truck-buyer loyalty was nearly as strong, slipping just 1 percent to 74 percent from the previous year, reported Edmunds, a source of automotive information.

“While historically truck buyers have been the most fiercely loyal to their segment, the growing number of SUVs on the market has given this segment the loyalty crown,” said the Edmunds report. “While segment loyalty for trucks remains high, it has leveled off in recent years, partly because there simply aren’t as many model choices available for truck buyers as for SUV buyers.”

“In fact, due to the breadth of SUV offerings of all sizes, the segment has developed into a funnel for buyers of all types – stealing business away from both cars and pickup trucks,” said Edmunds.

The biggest loser in all of this continues to be the car segment, the report showed.

Cars-owner loyalty slipped for the fifth consecutive year to 57 percent, down from nearly 70 percent, as millions of cars owners switched to SUVs and pickup trucks.

“In 2017, passenger cars accounted for 36 percent of all new vehicles sold,” said Edmunds. “This is the lowest market share figure ever for cars and a noticeable decline from just five years ago when cars constituted half of the sales in [the] new-car market.”

Edmunds noted that “slowing sales and lower margins have caused a few major automakers to either re-evaluate the passenger car segment or abandon it completely.”

In reaching its conclusions, Edmunds examined more than 13.9 million vehicle transactions “to delve deep into what drives buyer loyalty at both the segment and the brand level,” examining “why shoppers have made such a dramatic pivot away from passenger cars toward SUVs.”

Edmunds traced the shift in consumer preferences to a combination of the recession that started in 2008 and stricter, government-mandated, fuel-efficiency standards.

“The irony of the last decade is that had the recession not happened, and had automakers not been forced to develop more fuel-efficient SUV options, the segment may have stayed limited to just those buyers who preferred larger, truck-based SUVs,” said Edmunds. “But the fact that market forces compelled automakers to create SUVs that drove and consumed fuel similar to passenger cars actually led to abandonment of the passenger car segment we’re seeing today.”

More details are available in Edmunds Loyalty Report 2018 on brand performance.

Despite 2018 forecasts, dealers are optimistic about Q2 – Cox Automotive

Car dealers are optimistic about next quarter.

Maybe that optimism should come as a surprise considering predictions that new-vehicle sales will decline again this year and that used-vehicle sales will rise only slightly.

New-car sales the first two months of the year were down about 19,000 vehicles compared to 2017, with March sales figures due out in a few days. Last year, March was the second-strongest month of the year with new-vehicle sales of about 1.55 million.

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And yet, the mixed outlook is not enough to curb dealers’ enthusiasm for the second quarter.

“Expectations for the next quarter are up substantially [over Q1],” according to a Cox Automotive survey of 896 dealer respondents from Jan. 29 to Feb. 12. “More dealers expect conditions to be strong in the future compared to those who believe conditions will be weak.”

“Dealers have very high expectations for the next 90 days, with positive views of the recent tax reform likely contributing to their optimism,” said Jonathan Smoke, Cox chief economist, in a press statement released just before the NADA national convention. “They expect their customers to have more disposable income and the U.S. economy to be stronger as a result.”

Other significant market improvements reflected in the Cox survey, Dealer Sentiment Index, include:

  • A decline in pressure to lower prices.
  • An increase in dealers’ ability to get credit.
  • Increases in new- and used-vehicle inventory levels.

“Perceptions of the new-car sales environment by franchise dealers remains one of the most positive areas of dealer sentiment,” Cox reported, with the index rising 17 points to 70 from 53 recorded in Q4.

The increase was similar among both franchise and independent dealers.

Sentiment among new-car dealers was higher than last quarter in most areas, including new-vehicle sales environment, new-vehicle inventory. Optimism was greater among both franchise and independent dealers responding to the Cox survey in describing the current used-vehicle sales environment and current used-vehicle inventory levels.

“The current market improved, but expectations for the market moving into the spring jumped even more dramatically,” said Smoke. “Dealers are optimistic by nature, so I expected stronger views for Q2 … [but] the strong optimism and high expectations surprised even me.”

Download a copy of the first-quarter Dealer Sentiment Index results at Cox Automotive.

Sands Chevrolet

16991 W. Waddell Road

Surprise, AZ

 

Dealer principal: Jerry Moore and Chad Helmer

General manager: Chad Helmer

Brands represented: Chevrolet

How long in business: This location has been in business seven years, Sands Chevrolet, 84 years.

No. of employees: 300

Annual unit volume (approximate): 4,000

SC Area Sales Manager: Thomas Mann

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What makes Sands Chevrolet special:

The people and the processes make our dealership special

ASM Thomas Mann’s comment on what makes dealership special:

Everywhere you go at the dealership, someone is willing to help, from the front desk to the back offices.  They are very focused on looking forward and not back.

What do you like about doing business with Santander Consumer USA:

Using the Extranet. This is a phenomenal tool that not only allows you the ability to rehash deals but also speeds up the funding process by utilizing the upload feature. Our ASM is great asset, as well, because he has the ability to help us solve some of the more complicated issues that arise – helps to problem-solve and escalate issues to the appropriate party for a quick resolution.

For example:

We recently had an issue with deal that had been held in funding. Apparently the vehicle had been reported as frame damaged. Upon further review and sending the vehicle through our frame shop, we were able to say confidently that this vehicle was not frame damaged.

We tried to clear it through [the vehicle-history report company], but it quickly became apparent they were not going to be very helpful or concerned about the time constraint we faced. Shared the information with our ASM, who routed it to the SC Dealer Advocacy team, which contacted me promptly. Upon review of the information I shared with them, the deal was funded before the end of the day.

What originally looked like a real headache turned out to be another great example of why we do business with Santander Consumer USA.

One best practice that contributes to your dealership’s success:

A final look over every deal, just a quick look over all of the documents to ensure the “t’s” are crossed and the “i’s” are dotted.

 

– Howard Forman, Finance Director

 

 

Jerry Moore, dealer principal, left, with Howard Forman, finance director, at Sands Chevrolet.

Jerry Moore, dealer principal, left, with Howard Forman, finance director, at Sands Chevrolet.

Buick top ‘mass-market’ brand for customer service – J.D. Power

The way to a vehicle owner’s heart is through …

Customer service.

High-performing dealers will tell you that a high level of service helps drive customer satisfaction and ensure a positive customer experience.

And that’s money in the bank.

Brands can be made or broken by the collective customer satisfaction.

Buick is riding high in J.D. Power customer service study.

Buick is riding high in J.D. Power customer service study.

In the case of the latest J.D. Power Customer Service Index Study, the “mass-market” standard is set by General Motors’ Buick brand, for the fourth time in five years.

Buick, which received five out of five quality circles, was one of three General Motors brands in the top four along with GMC and Chevrolet, both of which scored four of five circles.

Only MINI broke GM’s grip on the top four, finishing in a tie for second with five JDP quality circles. MINI also was the only brand that has beaten Buick among mass-market brands in the last five years.

“Buick, for the second consecutive year, ranks highest in satisfaction for dealer service among mass-market brands, with a score of 850 [out of 1,000],” according to JDP’s press release about study results. Chevrolet and Mini tied for second at 849, followed by GMC at 843.

This year’s luxury brand winner was Infiniti with 876 points, making it the fifth different winner in five years in that segment, and beating out Porsche at 874 and Audi, Cadillac and Lexus at 871.

The study, which was based on responses from more than 74,000 drivers of 2015 to 2017 model-year vehicles, measures customer satisfaction with every aspect of their vehicle shopping experience, including their satisfaction with the dealership from which they purchased a vehicle as well as the dealerships they visited but from which they did not purchase a vehicle.

JDP found that overall customer satisfaction “continues to improve,” along with gains in customer satisfaction with service adviser, service facility, service initiation and vehicle pick-up.

“When a customer is happy with the service a dealer provides them, they’re more likely to tell their friends and family members about it,” said Chris Sutton of JDP’s U.S. automotive retail practice. “This experience creates promoters for the vehicle brand who are more likely to return to a dealer for repairs and common services like oil changes and replacement of batteries, brakes and tires.”

Among other JDP study findings:

  • Customers prefer online service scheduling capability, with Internet usage increasing among all generations, although younger customers adopt it at a much faster rate.
  • Overall satisfaction improves with valet service in which a vehicle is picked up for service and returned, especially among premium-brand customers.
  • Common reasons customers choose a service provider are prior experience and convenience.
  • Younger customers seem to be influenced more than other generations by promotions, coupons and word of mouth when choosing a dealer to service their vehicles.

The results for both mass-market brands and luxury brands, as well as more details about the study are available at the J.D. Power website.