Loan vehicles: generate income, customer satisfaction

While some stores may be reluctant to use loaner vehicles, if managed effectively, they can positively impact your business in many ways, resulting in higher sustained income. Here are a few ideas that I am pushing for stores evaluating a new loan program or looking to maximize the value of their existing loan fleet.

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Whether you are considering belonging to a store or lending through a third party, these points can help you assess the loan / no loan decision and understand how your customers and competitors view loan programs.

Expand your geographic footprint

Independent tire dealers and auto repair shops have reported to us that customers are bypassing their garage and going to a store further away because the competing store advertises they are offering a loan. The promise of a loan was enough for the competition to poach customers who would normally take their cars to a nearby local garage. Additionally, many customers have longer trips that require a car and are not able to easily travel to and from your store. Providing a loan allows these distant customers to use your services without major disruption to their schedules.

Increase your local market share

Obviously, auto stores are competing for customers. Why one customer comes to your store versus another depends on several factors, including the perceived expertise, reputation, and convenience of your store. Loans are part of the convenience factor. Unless you live in a large metropolis, having easy access to a vehicle is a must. Customers have to get to work, take their kids for a workout, and go to the grocery store. Providing a lender alleviates all the convenience barriers for a customer bringing their vehicle to your store.

One of our customers has requested that we add a “wait list” feature to our system. It turns out that many customers only bring their vehicle when a loan is available. These clients will delay their service until a loan can be provided, but are prepared to postpone their service appointment if a loan becomes available. Not having lenders means your store may be missing out on those leads and their associated service income.

Increase customer satisfaction and loyalty

Although independent repair shops vary in how (and if) they track customer satisfaction, car dealerships are very focused on this problem. They measure it using an industry metric – the Customer Satisfaction Index, or CSI. Dealer service departments know, as do auto manufacturers, that a higher CSI translates into more service revenue and greater customer loyalty.

In the competitive world of new car sales and service, car manufacturers are a big push for dealers to set up a loan fleet because they know that loans are a major factor in increasing CSI. This same principle applies to tire dealers – stores that offer loans will have a higher level of customer satisfaction, which will build customer loyalty.

When a customer has another car to drive, they are less pressed for time to complete their repair and are more likely to accept additional services as the extra time required will not impact their daily schedule. .

Loans result in higher average repair orders

A customer in a loaner vehicle is more likely to approve additional maintenance work, resulting in increased revenue per repair order. This is another aspect of the convenience factor. When a customer has another car to drive, they are less pressed for time to complete their repair and are more likely to accept additional services as the extra time required will not impact their daily schedule. .

Surveys show that higher turnover per repair order is consistent across all types of stores, whether the stores service older vehicles or newer premium brands. Providing a loan with the repair means that the stores will be able to sell the necessary services to their customers.

Stop worrying about supply or inventory issues

Stores in or near major cities can easily have parts delivered just-in-time, while stores further away often require three to four days for parts orders. By offering loan services, stores facing inventory issues can still capture revenue from customers who cannot do without a vehicle for an extended period of time. Additionally, having a lender decreases customer stress and avoids repeated calls from customers asking when the repair work will be completed.

Cost of doing business

When it comes to generating service opportunities, you compete not only with other local repair shops, but also with car dealers in your area. Dealers have vast resources and rely heavily on service bay revenues to increase the overall profitability of the dealership. Many car dealerships offer free loans as well as other premium benefits to attract customers. Some of these perks tend to be more like a spa than a visit to the repair shop, which some customers like. Not all of your customers will be swayed by the benefits, but stores that don’t offer loans are at a huge disadvantage.

This is especially true for stores that serve luxury or high-end brands. Premium vehicle owners expect loaner vehicles to be part of their ownership “experience” and dealers normally provide them as a courtesy. For a store to compete with dealers and capture this service revenue, loans are needed. It’s just the cost of doing business.

Differentiate

Whether it’s a business owned by a store or a contract through a third party, investing in a loan fleet is a big decision. While issues like fleet sizing and utilization are critical, loaner vehicles have been shown to increase revenue, boost customer satisfaction, and build customer loyalty. As stores look for new ways to generate income and differentiate themselves from the competition, lending is an avenue that many stores are exploring with great success.

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About Mohammed B. Hale

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