Used vehicles are becoming an increasingly important source of sales and service revenue for dealers as new-car sales margins and manufacturer incentives become slimmer. Many consumers, too, realize used vehicles better fit their budgets.
However, some people still hold the dated misconception that used vehicles are old “clunkers” with high mileage and low reliability.
An Ally survey found that Americans seriously overestimate the average age of a used vehicle (which is about 4 years), but underestimate the average cost at the point of sale (about $20,600, according to Edmunds) by over 50%.
These misconceptions don’t accurately reflect today’s used-car selection, with improved quality and more available tech and safety features. This presents a great opportunity for sales staff to educate their customers.
Here are three factors to consider when steering customers toward the used-car lot:
1) Introduce customers to certified.
With the wave of vehicles coming off lease in the past few years, used vehicles are returning to the dealership in great shape. As the off-lease, low-mileage supply continues to return to franchised dealership lots, the number of certifiable units has grown.
Reliability is top of mind for car shopper. The top two factors our survey found that would make a buyer consider a used vehicle were higher quality (which 40% of polled consumers agreed with) and whether the vehicle was certified (39%).
If used vehicles aren’t deal-breakers for customers, suggesting a certified pre-owned vehicle is a great way to introduce them to options in the used-car market with similar standards as many new vehicles in stock.
Offering free vehicle history reports also provides an extra level of reassurance that some shoppers seek.
2) Used cars are a great alternative for budget-conscious customers.
While there will always be those who prefer to be the first owner of a vehicle, used vehicles are a better financial option for many buyers, especially younger buyers who haven’t had as much time to accumulate savings.
Beyond the sticker price, it is equally important to educate buyers on the overall costs of owning a vehicle, including repairs and insurance.
Ally’s research found that the average car owner spent around $2,000 in repairs over the last five years. People ages 18-34 had the highest bill, paying an average of $2,334.
This is the chance for dealership F&I departments to shine. Introduce buyers to the F&I department that can tell them about their options for making repair costs more predictable, such as a vehicle-service contract.
Our survey found that only 21% of Americans have purchased a VSC or extended warranty in the last five years, so this is a prime opportunity for dealers. Use a menu to offer customers service options. This seemingly simple practice is an effective step toward converting sales.
3) Guide customers through the car-buying journey.
Most people (67%) think the car-buying process is stressful, according to a Mintel study. For many consumers, it’s one of the biggest purchase decisions they face, which can make it overwhelming. This is the dealership sales team’s chance to help guide them through the shopping process.
Ally’s survey found that 53% of Americans feel most comfortable shopping for a used vehicle at a dealership that sells both new and used, as opposed to a private sale, an online platform or a dealership stocking only used vehicles.
Choice clearly matters to consumers but show them the full range of options. Find out more about their needs and preferences to help them buy the best vehicle for their lifestyles and budgets. (Wards Industry Voices contributor Matt Arnold, left)
Doing that can create strong and lasting relationships.
Matt Arnold is Ally Financial’s senior regional vice president-auto finance.