As vehicle shortages drag on, the effects ripple through more than new and used vehicle sales. Customers also face challenges as their options for new leases dwindle.
Dealerships must do more in this environment than just sell and service vehicles. Playing the role of customer advocate avoids the risk of losing loyal customers who are frustrated by dealerships who don’t help them.
Customers returning to the market have few options and historically high prices, and customers nearing the end of their lease are particularly affected. Lease costs are high, options are low, and many lease customers who historically enjoy having a new vehicle that they don’t have to maintain will eventually buy out their leases. According to NADA’s annual report, consumer leasing of new vehicles has fallen 6.5% over the past two years.
With price increases, lease payments on new vehicles are much higher than they were when many customers last signed a lease. Lease customers have the option to buy out their lease for the vehicles original cost, which is much lower than new vehicle prices or even on the same make and model due to price increases.
While that might not sound bad (negative?) at first glance – this is a vehicle sale, and you may also be able to sell a service package to those customers who prefer not to visit the drive-thru – your client may be upset when they don’t get the lease they want. With high vehicle equity, these customers can sell their vehicles to other dealerships, using the inflated vehicle value to offset the cost of leasing or buying a new vehicle. The only thing worse than angry customers are customers lost because your dealership didn’t meet their needs.
Prioritize proactive communication
How do you keep customers from leaving your dealership when rental options aren’t as strong as they were a few years ago? The best defense against this, and against competitors’ attempts to conquer in today’s hyper-competitive marketplace, is consistent customer communication at every stage. All customers come back to market at some point, but lease customers have specific due dates, making it easy for dealers to track their buying journeys.
Complete and very precise data is key to this process, enabling dealerships to confidently engage rental customers with relevant and personalized messages tailored to the stage of their journey.
Dealerships should be on the radar of their lease customers as early as 12 months before the end of the lease. This is when you lay the groundwork: reach out to customers to gauge their satisfaction with their current lease and address any immediate concerns. It’s also best to discuss current and projected rates and availability and inquire about customers’ future rental or purchase plans.
Six months later, set expectations again for current pricing and availability. This can lead to a discussion of pre-order or reserved sale options that shows you’re doing everything in your power to have your customer’s favorite vehicle ready for them at the end of their lease. Also stress the importance of developing a personalized end-of-lease plan that addresses the timing and process of vehicle handover.
After three months, discuss pre-order or reserved sale options and estimated delivery dates, as well as lease extension options to bridge the gap between contracts if the desired vehicle is not available or delivered later than expected. Look for similar, readily available models that might meet your customers’ needs.
Get to know your customers
Understanding your customers and their preferences is key to keeping them engaged and maintaining their business when they return to the market. Throughout this year-long process, you get to know your customers and they can see that your dealer is doing everything possible to get them the vehicles they want.
These proactive discussions provide the opportunity to find out why a customer is renting. Is it for the service aspect? Is it better suited to their budget? Discuss options they may not have considered, such as buying out their lease through your F&I department and purchasing a service package.
Since lease buyouts are the worst case scenario in this market, it is essential to ensure that the customer processes their lease buyout at your store rather than through their captive finance company, leaving the customer with a positive experience to keep them coming back.
Dealership managers must anticipate and be proactive in these ever-changing times in the automotive retail world. Communicating and engaging with customers is the best way to meet their needs and remain a priority when they decide to return to the market. It also lets you build a custom return-to-market plan that takes all options into consideration.
Following these tips will help you retain your customers because they will feel supported and informed, regardless of inventory issues.
Ricardo Rodrigues (photo, top left) is Senior Director of Dealer Relations at automotiveMastermind.