With NIADA CPO and the Internet Creating a Level Playing Field, Independent Dealers’ Low Overhead Gives Them an Edge in the Used Car Market

Last year was one of the best retail sales years in car business history. And looking forward, sales in 2016 and beyond should benefit from the wave of full employment, low interest rates and low fuel prices to continue knocking down strong years. So where does the independent operator fit into this sales boom? How do owners in this segment of the market maximize their dealership value?
   As new car franchises hit record numbers, the trend creates opportunities for independent sales organizations. But the question is: How can you capitalize on those opportunities when they are presented?
   The Internet allows independent dealers, no matter how small, to compete on an even playing field with mega-franchises.
   It is important to know that new car franchises look for one-to-one new-to-used sales. They’re currently running at about .02-to-one used-to-new, according to NADA data.
   With used car prices at an all-time high, according to Edmunds.com, and new car dealers renewing their efforts to conquest used car customers, independent operators needs to be prepared for the future — not only to gain market share, but to keep what they have.
   On the Internet, the small operation is the same size as the largest dealer. If an independent operator takes advantage of his opportunities while diminishing his competition’s added value, the independent dealership can compete very well with new vehicle showrooms.
   When looking at how to best capture a percentage of sales generated from the big-box retailers, it is always wise to examine the advantages and disadvantages of your position versus local new car dealerships.
   The biggest and most obvious difference is the facility. New car franchises are required by their OEMs to meet certain specifications in order to remain a franchisee.
   Those cathedrals to car sales look great and attract customers, but in the final analysis add nothing to the value of the vehicle purchased. In addition to that zero value, the future and present state of the auto industry relies heavily on Internet sales, which makes these structures almost obsolete.
   The costs of building and maintaining the facilities at most franchise lots are astronomical. And because the new car business is so competitive, the franchise stores’ profits from their new vehicle departments are minimal. That means the costs must be paid for through used car sales, the service department and increasingly higher profits in service contracts.
   The overhead advantage works in favor of the independent used car dealer.
   This is the best news for independent dealers. A small lot can be just as spectacular as the largest franchise on the web.
   If the independent dealer can get his message out to customers, he has a chance to take one or two new vehicle customers and some used customers from a larger dealership.
   One very important statistic to keep in mind is that a new car purchaser will consider a used vehicle instead 59 percent of the time – if the used vehicle is certified.
   That creates an opportunity for a used car dealer to capture new car business.
   It means if the new car market consists of 1,000 people per month in your area, 590 of them would look at a good certified pre-owned vehicle. Attracting 1 percent of those customers through the Internet translates to six vehicle sales a month.
   The great change that the Internet has brought is a larger marketplace and a greater opportunity for used vehicle operations to cash in.
   Unfortunately for new car franchises, the Internet really serves to drive profits down in the new vehicle world because of the competitive advantage it gives the customer.
   A new vehicle at one lot is no different than the one down the street. Customers can locate and negotiate its purchase at multiple lots, pitting one franchise dealer against the other and putting the customer in a power position.
   Not so with used vehicles. They are all different because of miles and vehicle condition, which makes location a much more important factor in the shopping experience.
   That is why eBay retailers like NIADA president Frank Fuzy of Century Motors of South Florida can get customers from all over the country. The shopping those customers do is powered by the way a vehicle looks and the way it is described on the Internet.
   If a vehicle is clean and in front-row-ready condition — featured with an appealing background, shown from all angles inside and out, badged with vehicle certification, and presented with a limited warranty and an explanation of the meaning of CPO — an independent with the smallest lot will be able to compete for a customer’s attention against the largest retailers.
   Many small operations don’t put the effort into the photos they post on the Internet. They need to realize it is the equivalent of the showroom of the ’60s and ’70s and should be thought of as a display case.
   Large dealer groups put a huge emphasis on their web display in their marketing efforts, making sure that the vehicles and the ambience of the background appeals to visiting customers.
   Typically, social media is where customers first see a CPO program’s commitment to quality. If customers don’t feel the program meets a high standard, they will not feel safe doing business with that dealership.
   Participating in CPO programs offered by organizations like NIADA announces your commitment to integrity and allows your website to display certified units, which shows your commitment to the customer and the industry.
   But simply being a member of such a program is not enough. You need to broadcast what that membership means so customers become informed enough to tell the difference between an NIADA member and other car lots.
   Another thing to keep in mind is new vehicle dealerships really have little advantage in inventory. They might carry more units than a smaller store, but independents should be able to be more responsive to the customer’s needs.
   Everybody pays the same price for automobiles. Whether it’s purchased at the auction, traded in for a new vehicle or bought wholesale, a car is worth what it’s worth.
   The real advantage for a dealer is the ability to have vehicles certified by a national source. Usually, that means a factory certification program administered by a manufacturer that has invested millions of dollars into creating a certified market. In doing so, it has created a niche in the customer base for people who have a prejudice toward buying a vehicle that is certified and will not look at anything else.
   Certified vehicles now make up 65 percent of the used vehicles sold by franchise dealers. That means any car lot that does not have some certification program is only going to be a viable alternative to 35 percent of the used vehicle market.
   So how do you certify your vehicles?
   There are really three ways — through the factory, a dealer-branded program or a third-party program.
   Factory dealerships are strongly encouraged to certify every vehicle through their OEM’s programs. While those are very good certifications, there is no proof customers put any more credibility in those programs than they assign to third-party or dealer-branded programs.
   Customers know they want certified even though they may not be fully aware of what that means. What customers are really looking for is tangible evidence that the certification is meaningful and that there is a credible program behind it.
   Factories have spent millions making customers aware of certification and the value of a certified vehicle. They have even tried to tie certifications to new vehicle franchises.
   But that can work to an independent dealer’s advantage.
   Factory programs are very specific as to what is certifiable, making their certified vehicles cost more in reconditioning than the average trade-in. And OEM programs get into distinguishing between vehicles with or without matching tires or if they have factory-installed floor mats, when customers really just care about the vehicles being mechanically sound.
   A customer might not be buying a certified vehicle because the program has a limited warranty attached, but a limited warranty offers proof, from the customer’s point of view, that the certified vehicle should command a higher price.
   Customers feel if the entity issuing the certification is also backing it with a limited warranty, that entity must believe in the certification process.
   To be a credible certification program, there has to be reputable company paying the bills for customer repairs. A strong financial backer, along with coverage that protects customers from the fear of buying someone else’s problem, offers the peace of mind customers are looking for when they decide to purchase a certified vehicle.
   Factory stores are forced or strongly encouraged to go with factory-backed certification programs. But recently, more and more progressive dealers like Huntington Honda in Long Island, N.Y., have elected to venture off with their own dealer-branded programs.
   Groups like this have seen how the high costs of factory programs have limited their profits without providing a significant benefit over other nationally recognized programs.
   The best known and most respected of the nationally recognized certification programs outside of the OEM brands is the NIADA Certified Pre-Owned Program.
   Frank Fuzy credits the NIADA CPO program for giving him the credibility that has helped him sell vehicles on eBay.
   Frank is the king of eBay sales – he sells more cars on eBay using the program than any other dealership. At the 2015 NIADA Convention and Expo, Fuzy said he hopes more stores don’t start using the NIADA CPO program because he competes nationally on the Internet and believes the program gives him an advantage he doesn’t want to give up.
   Teaming with NIADA removes the biggest advantage a new car franchise has. Statistics show that 65 percent of all people buy a car where they get it repaired. So when your customers are using your warranty, you can direct them to the service department where you want them to have their repairs completed.
   The NIADA CPO Program allows independents to bring customers into their service area, creating another profit center as the warranty pays for retail parts and labor.
   The greatest equalizer in the history of the car business is the Internet. When automobiles are presented on the Internet with NIADA CPO certification and a limited warranty, they stand out from the fog and clutter of vehicles advertised on the social media outlets.
   The dealer or independent operator who knows how to take advantage of the social media setting will be able to excel in the new environment we find ourselves in.
   For example, when Fuzy advertises on the Internet that he certifies his vehicles with the NIADA CPO program, he gains an advantage in several ways.
   First, his organization is saying it has an agreement with a national organization that was founded on ethical business practices. Plus the program is backed by Warrantech, a wholly owned subsidiary of AmTrust Financial, which is A+ rated and accredited by the Better Business Bureau.
   That gives Fuzy’s customers peace of mind and an affordable program that provides rental vehicle benefits, towing and trip interruption coverage equal to or better than most megastores.
   Using a program like NIADA’s allows an independent broker to take advantage of the cost of maintaining the lot he has as opposed to a new car franchise’s Taj Mahal.
   Simultaneously, it allows for more gross profit and faster turn of inventory while alleviating the risk that a customer assumes.
   Risk is what drives the used vehicle industry. The more risk a customer is willing to accept, the less the vehicle will cost. A 12-year-old vehicle with 100,000 miles is much less expensive to purchase than a new vehicle because of the risk in ownership.
   That risk is mostly due to repair costs, which can be offset with a CPO program like the one offered by NIADA.
   Many experts foresee a golden age in vehicle sales over the next 10 years, with predictions that average annual new vehicle sales will reach 17.5 million. Sales of that volume would make it the best sales period in the history of the auto industry.
   Independent used vehicle operations that take the time to position themselves at the top of the pyramid and are prepared to take a portion of new car franchises’ business will find this a very profitable period.
   By partnering with the right organizations and following through with what you promise, you can use the next 10 years to establish your dealership as a dominant force in the market.
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New Program Offers Certified Pre-Owned Cars With A Warranty

The following story and broadcast appeared on WSPA 7 News, a CBS affiliate in South Carolina. To view the video or read the original article, visit: http://wspa.com/2016/08/11/a-brake-for-used-car-buyers-new-program-offers-certified-per-owned-cars-with-a-warranty/
We get a lot of calls from viewers who bought a used car, “as is,” only to have it break down shortly after. When dealers won’t fix it, drivers are out of luck.
Now a new certified pre-owned program that’s spreading across the country has made it to the Upstate. There’s only one local dealership in that program so far because it’s so stringent. So we looked into the benefit for consumers, and whether there is a cost involved.
“Our program bases a lot on statistics. We know that if you do 125-point inspection on a car, the odds of it breaking down go down to minuscule,” said William Carr with AmTrust/Warrantech.
The warranty backers have teamed up with the National Independent Automobile Dealers Association to support the certification program.
In addition to that thorough inspection, each vehicle will also get a Carfax report, recall check and come with a warranty of at least 3 months/3,000 miles, or 10yr/100k powertrain.
“By giving the consumer a better product, in the long run we’ll sell more cars. So I think it’s a win win,” said Darla Booher, the owner of Deal Depot in Greer, Spartanburg and Duncan.
Her dealerships are the only active members right now. And as such, those lots will have to abide by a strict code of conduct.
“There is a very stringent standard that deals not just with the inspections but with the entire running of a car lot. Recently an upstate dealer had to exit the program because they couldn’t live up to the standards of the program,” said Carr.
There are about 80 dealerships across the country involved in this program, with about 5 new ones added each week. In fact one in Greenville is coming on board before the end of the summer.
Administrators say the program cost for inspections and the warranty are minimal. But of course it begged the question, is that passed along to consumers?
“No, there’s absolutely not additional cost to the consumer,” said Booher.
In fact, when it comes to the warranty, it’s illegal for a dealer to charge for that or it becomes a service contract.
One word of caution, as a consumer you want to make sure that there’s no bait and switch. If a car is advertised as certified, the dealers should not offer to take off the certification for a lower price. That’s illegal.
The NIADA Certified program performs quarterly inspections to make sure all dealers are continuously compliant.

Is Your Extended Service Plan Program Fully Supported?

Having an extended service plan program that fits your business model is important. But it’s just one piece of the puzzle. Have you considered how your program is supported? Without the proper infrastructure, it might not be as effective as it could be. Making sure your customers are taken care of is as essential as the contents of a well-designed service contract and vital to the overall success of your business.
At Warrantech, we continuously strive to improve the quality of service provided to all customers. We believe that quality has to be the foundation of everything that we do and everything that we represent. To us, customer service is not just a team or a process, it does not have a starting point or an ending point – it is part of the culture in everything we touch.
To bolster this approach, Warrantech employs a dedicated Quality Assurance Department that reports directly to our Call Center Director, identifying strengths and weaknesses, and effectively managing the workforce to optimize service delivery. This department serves as the foundation for our call center as they monitor all personnel on a daily basis and provide performance feedback on:
• Professionalism
• Customer interaction
• Procedural adherence
• Claims adjudication
• System usage
• System documentation
• Call lengths
We also make sure that customer service is readily available. Customers can file claims through a dedicated toll-free phone number, email, web chat or Claims360, our proprietary online platform. We even support mail and faxed claims as well.
To handle escalated customer issues and complaints, we have created a Presidential Team. This team, which is located within the call center, maintains a close relationship with each of our partners, the Account Manager(s) and executive teams. Their task is to work with a client in the event of an escalation to ensure the best possible service. This team receives referrals from the call center associates, direct from our clients, from executive escalations and from all forms of social media.
Any customer who seeks to speak to a supervisor or is contacting us for the same issue on more than one occasion is immediately transferred to the Presidential Team. These associates are equipped with advanced customer service training and problem resolution and have the full power and authority to make the appropriate decision by working with the client to ensure that together we are achieving customer satisfaction. The Presidential Team member owns the service experience through completion and documents every aspect of the resolution.
The information that is recorded by the Presidential Team is reviewed monthly by call center management and Warrantech executive management, as well as the training department to identify process and procedure improvements needed to avoid future escalations. Supervisors use the feedback from the Presidential Team in their weekly meetings and individual coaching sessions with their associates. This approach creates a customer who is not only satisfied with the outcome of the transaction, but a customer who walks away from the experience with a positive outlook on the service contract, Warrantech and, most importantly, our clients.
Warrantech Support Process At A Glance
  • Every customer contact is recorded and stored
  • Appropriate staffing levels are maintained and based on program, time, date and SLAs
  • Unique telephone numbers and websites are utilized for each client
  • IVR is used to appropriately route calls based on program, contact type, etc.
  • IVR provides contact center associates with customer information prior to transfer
  • OEM and/or partner calls can be immediately routed to the appropriate entity
  • All customer contacts are monitored in real time to ensure that all service-level agreements are met

 

Visit warrantech.com or give us a call at 800.833.8801 to learn more about how we can support your business.