Inconsistencies and Lack of Transparency Around Consumer Incentives Leave Extra Profit on the Table for Dealers

ATLANTA – Feb. 15, 2019 – With vehicle prices and interest rates rising and consumer affordability declining, dealers can’t allow any details to slip through the cracks. However, a new whitepaper released by Cox Automotive’s Rates & Incentives group (CAR&I), “Optimizing Rebates & Incentives for Consumer Digital Retailing Experience,” pinpoints a lack of transparency and accuracy in the pricing and payment negotiation process as a main cause of friction between dealers and consumers that can derail a deal.

According to the 2018 KBB.com Incentives Survey, only 24 percent of shoppers are fully aware and researched all incentives.1 Historically, transparency into consumer incentives has varied. Changing customer expectations and shopping behaviors now make full transparency required.

Today, more automotive dealer service providers (DSPs) are moving the process of applying incentives from a dealer practice to a consumer-centric experience through digital retailing tools. With these new tools, customers can confidently research and price a specific vehicle with the incentives and conditional offers applied — all without entering a dealership. The success of the deal, however, relies on the accuracy of a dealer’s data within the DSP application.

Utilizing a methodology developed by CAR&I, this new whitepaper analyzes the accuracy of the data used to calculate pricing and payment information presented through DSP tools. In the study, CAR&I compared APRs, cash and conditional incentives through these various tools for seven new vehicles in the East Coast and West Coast markets. The analysis looked at data from three competitive incentive providers, including CAR&I.

The study found significant variations across the three providers, ranging from $0 to $6,750 in pricing for the same vehicle, resulting in monthly payment fluctuations up to $122 per month for 60 months. The analysis also showed that both unnamed vendors incorrectly applied incentives for two vehicles, resulting in $500 to $750 in overstated incentives applied incorrectly costing dealers valuable margin.

These disparities have wide-ranging consequences for dealers, including a loss of credibility in pricing as well as a loss on deals and profit. It’s not just that consumers might walk away from one purchase. It can affect repeat purchases and referrals too. Pricing information must be perfect for digital retailing to build trust and transparency, and to improve the customer experience. This also means making accurate pricing available online.

“If DSP application incentive tools aren’t spot-on, the pricing information given to consumers is also inaccurate. If incentive and rebate data isn’t accurate, the whole deal can be sunk,” said Brad Korner, general manager for CAR&I. “Dealers in this hyper-competitive auto retail landscape can’t afford to have less-than-perfect pricing data. That can result in unhappy consumers and lost business.”

Rebates and incentives also continue to play a major role in generating demand and sales for many brands. Approximately 94 percent of new vehicles sold have a financial incentive applied to the transaction (purchase, finance or lease) which requires accuracy for dealers presenting pricing and payments to their online shoppers. Sharing full coverage of all OEM incentives, and allowing consumers to see what they qualify for, builds trust in the process. It also provides necessary information to inform the buying journey.

The full whitepaper on “Optimizing Rebates & Incentives for Consumer Digital Retailing Experience” is available here. 

1 Source: KBB.com Incentives Survey, November 2017. N=2508

About Cox Automotive

Cox Automotive Inc. makes buying, selling, owning and using cars easier for everyone. The global company’s 34,000-plus team members and family of brands, including Autotrader®, Clutch Technologies, Dealer.com®, Dealertrack®, Kelley Blue Book®, Manheim®, NextGear Capital®, VinSolutions®, vAuto® and Xtime®, are passionate about helping millions of car shoppers, 40,000 auto dealer clients across five continents and many others throughout the automotive industry thrive for generations to come. Cox Automotive is a subsidiary of Cox Enterprises Inc., a privately-owned, Atlanta-based company with revenues exceeding $20 billion. www.coxautoinc.com