In the Cape Times this morning, Roy Cokayne’s report on another double digit decline in New Car sales brings home the opportunity that exists in Used Cars and After Sales.
We really don’t want to panic about recession due to just one element of Franchised Dealer profitability, but rather see where the opportunity exists. There is still an appetite for consumers to change their cars and whilst they may not be buying new, they are buying used, and in some cases nearly new.
A few years ago, 72-month finance was introduced by the finance companies, as a way to keep their industry going when monthly repayments were deemed a little high, and pushed out the change date for most customers by 12 months. Standard Bank is now promoting 84-month finance on new cars (soon you will take out a bond!) and we will see people having to keep their cars for 5 years before catching up with the settlement. This approach may work in the short term for the lending institutions, but severely restricts the automotive retail industry and customers alike.
However, if people are keeping their cars for longer, then there has to be a great opportunity for service departments, if they are able to retain the clients for longer – post warranty and maintenance plan. Those Dealerships that are confident in their service levels, processes and pricing that will make a profit. Those simply looking for maintenance plan business will see their profits decline.
This is not a new idea. We come back to it every time there is a downturn in New Car sales. Only this time, sales have been declining for 10 years (peak May new car sales came in 2006 in SA).
Let’s not succumb to Einstein’s definition of insanity by doing the same thing over and over again expecting a different result. No more time for talking. The current paradigm has run for 50 years and it’s broken. It’s time to take action and relook at the way we run our service departments from the bottom up.