By Susan E. Burke, VP of Product & Marketing, 700Credit
The auto industry has done well the past eight years. Since bottoming out at approximately 10.4 million in new vehicle sales in 2009, the industry has attained an average annual growth rate of 7.6 percent for new vehicle sales. The near-decade momentum, which culminated in approximately 17.46 million new vehicle sales in 2017, meant growth came much easier than normal for most automotive retailers.
Most analysts predict 2017 industry sales will be flat (J. D. Power, 17.4 million units) or perhaps even down (NADA, 17.1 million units). Automotive retailers who want to achieve aggressive growth are going to have to adopt innovative marketing tools to identify more customers who are ready to buy.
One of the keys to success will be using existing information, either from your own DMS or from other information resources, to identify incremental sales opportunities.
Lease-Renewal Combined with Credit Worthiness
Leasing has grown rapidly in recent years. Nearly 30 percent of all new vehicle transactions were leases in the third quarter of 2016. Of course, high lease penetration means a steady flow of nearly new used vehicles coming back to market in short time frame. In 2017, nearly 3.36 million lease vehicles will return to market according to J. D. Power. Obviously, that’s a lot of customers who will likely need a new vehicle.
Automotive retailers can use data to help determine which lease customers are likely to return to market and when they are likely to return. Knowing this information for a local market is a powerful way for automotive retailers to target customers.
But, an offer can be made even more compelling when dealers overlay another important data point – the lessee’s credit information. Adding credit-based data to better target financially qualified customers often includes a prequalification for a firm credit offer. Combining the right offer at the right time helps get more qualified customers in the door.
Service Appointments Create Customer Interaction, Lead to Repeat Sales
Another excellent – and relatively simple — example of using data to increase sales comes from combining service offers and knowing the status of a customer’s current loan.
Based on the customer’s purchase date, a dealer can time offers simple maintenance such as oil changes and tire rotations. Of course, these are important interactions that keep a customer coming into the dealership.
But, as the owner has had the vehicle for a couple years, their service visits become tailor-made sales calls. A quick check (soft-pull) of the customer’s credit file will pull up several factors that can help the sales and F&I team package a great deal.
For example, learning how much the consumer owes on their auto loan, cross-referenced with used vehicle pricing data, will reveal if the customer has positive equity on the vehicle. If so, the sales department can be alerted and an offer for a new vehicle with trade-in and financing can be developed while the customer waits.
In addition, the F&I department can compare the customer’s FICO score to the interest rate on their current loan. If the customer’s credit score has gone up since taking out their last vehicle loan, a better interest rate could get the customer into a lower monthly payment on a new vehicle. This conversation becomes even more enticing if the customer is looking at a large repair order, which can be surrendered with the vehicle in trade.
Credit scores also can be used to help point a customer to a vehicle they can afford – and at the same time, save valuable time for the sales team. If a customer has a score in the 500s, it’s not likely they’ll be able to afford the monthly payment on a new Mercedes. It’s better to learn this up front before the sales team spends hours with an unrealistic customer. Time would be better spent pointing the customer to a nice, clean, safe used vehicle, perhaps.
Ultimately, use of these informational tools is a win for the customer – they walk out with a vehicle that meets their needs. But, it’s also a win-win for the dealer, as they end up with a new vehicle sale, inventory for their used vehicle operations and satisfied customers.
Embrace Data for a Brighter Future
Those a few relatively simple methods for using credit data to make an offer and move toward a sale, but other examples exist. Finding the right customer with the right offer at the right time – one that fits their credit profile and their budget is smart, not to mention the way of the future.
Dealers who get on board will have a significant leg up on their competition in the coming years.