A recent article in Automotive News highlighted a start-up seeking to help dealers offer loaner cars and delivery/pick-up services without the additional expense of staff. RedCap Automotive Technology is a concierge service that provides drivers in Uber-like fashion to dealers. Dealers who utilize RedCap’s concierge service are able to contact RedCap when a customer needs service. RedCap then arrives at the dealership, picks up the loaner car, takes it to the customer and returns to the dealership with the customer’s vehicle. When the service is completed, RedCap then returns the customer’s vehicle to the customer and brings the loaner car back to the dealership.

According to the article, dealers get more efficient use of their loaner car fleet as vehicles are returned faster because they no longer have to wait for a customer to finish their work day to return the loaner. In addition, it solves a major customer pain point of lack of time to bring in their vehicle. It also eliminates the need for the customer to wait. Automotive News reports that dealers using the service have experienced an increase in service revenue since customers are more likely to accept service recommendations over the phone, knowing that if they accept, they won’t be stuck waiting in the service lounge for an unknown period of time. Some dealers are even exploring ways to offset the service costs by selling it as a product through the F&I office.

Any time dealers can make it more convenient for a customer to get their vehicle serviced, they will see increased revenue and customer satisfaction. Another additional benefit I see is that it makes it easier for dealerships to schedule larger repairs and recall work at times that are convenient to the dealer. One of the biggest problems with the massive amount of recall work is availability of parts. And, once those parts arrive, the dealer must then track down a customer and schedule them to come in and get the recall work done -- which could be a week or more, depending upon the customer’s schedule. Dealers could use RedCap as a means to decrease the time between parts arrival and recall work completion. Now they can reach out to a customer and offer this delivery/pickup service at the dealership’s convenience. Since the customer experiences less disruption in their schedule, chances are pretty good that they will be more amenable to working on the dealership’s schedule, rather than finding a day and time that fits their schedule.

While RedCap is currently operating with just 50 retailers, it does plan to expand into several thousand stores in 2016. It’s certainly a valuable service for dealers to consider, and could be a great way to provide a better customer experience. It should certainly lead to greater customer flexibility as far as scheduling. It could also help decrease the lag time between parts availability and recall work completion. That’s a win-win for the customer, the dealer, and even the OEM!

In a newly released report conducted by J.D. Power and commissioned by the National Automobile Association, trade-in value reduction due to proposed legislation could have significant financial impact on both dealers and consumers. The “Used Car Safety Recall Repair Act” will prevent dealers from retailing vehicles with any open recalls. This could cause dealers to be hesitant in their trade-in valuations due to unknown recall repair delays in the future. Dealers forced to wait for a recall repair would undoubtedly assign trade-in values at a lowered amount, simply due to having to hold on to the vehicle. The study analyzed trade-in value reductions from recall initiatives that originated in 2014. The average trade-in reduction across the board was $1,210, factoring in both in and out-of-brand trade-ins. However, it was noted that vehicles with recall repair delays exceeding 90 days could experience a trade-in value decrease of up to $5,290 for in-brand dealers, and $5,713 for out-of-brand dealers. Recall repairs with delays exceeding 90 days accounted for 69 percent of vehicles traded in with open recalls during the time period of the study.

Were this legislation to pass, it could have a huge impact on sales in general. Consumers might be hesitant to accept trade-in value reductions and choose to wait until the repair is completed prior to trading in the vehicle, costing a dealer an immediate sale. Dealers could also be forced to sit on vehicles, which could be a financial burden. Surveyed dealers reported “less willingness to purchase an out-of-brand trade-in compared to an in-brand trade-in when faced with a repair mandate and a repair delay of unknown length,” according to the study. This legislation would also reduce the amount of available pre-owned vehicles available, which in turn would increase auction values and vehicle pricing to consumers, due to simple supply and demand economics. Pre-owned vehicle sales are typically more profitable than new vehicle sales as dealers have more control of their profit margins and back-end products such as warranties can be an easier upsell.

There’s little doubt that the safety of consumers is the primary motive of the legislation. That being said, dealers are making efforts and completing recall repairs as efficiently as possible, as parts become available and consumer awareness efforts increase. The ripple effects this legislation may cause would almost certainly have an enormous financial impact on the automotive retail industry as a whole. Perhaps the solution isn’t to force dealers to sit on inventory, but rather to shift the focus away from sales and towards increased production and availability of parts needed to complete open recalls. This would allow dealers to complete open recall repairs faster, which would reduce the trade-in aversion some may experience. Whether or not this would accomplish the stated intent of the legislation is unknown. But one thing is certain -- this legislation could certainly negatively impact our industry.

In a newly released report conducted by J.D. Power and commissioned by the National Automobile Association, trade-in value reduction due to proposed legislation could have significant financial impact on both dealers and consumers. The “Used Car Safety Recall Repair Act” will prevent dealers from retailing vehicles with any open recalls. This could cause dealers to be hesitant in their trade-in valuations due to unknown recall repair delays in the future. Dealers forced to wait for a recall repair would undoubtedly assign trade-in values at a lowered amount, simply due to having to hold on to the vehicle. The study analyzed trade-in value reductions from recall initiatives that originated in 2014. The average trade-in reduction across the board was $1,210, factoring in both in and out-of-brand trade-ins. However, it was noted that vehicles with recall repair delays exceeding 90 days could experience a trade-in value decrease of up to $5,290 for in-brand dealers, and $5,713 for out-of-brand dealers. Recall repairs with delays exceeding 90 days accounted for 69 percent of vehicles traded in with open recalls during the time period of the study.

Were this legislation to pass, it could have a huge impact on sales in general. Consumers might be hesitant to accept trade-in value reductions and choose to wait until the repair is completed prior to trading in the vehicle, costing a dealer an immediate sale. Dealers could also be forced to sit on vehicles, which could be a financial burden. Surveyed dealers reported “less willingness to purchase an out-of-brand trade-in compared to an in-brand trade-in when faced with a repair mandate and a repair delay of unknown length,” according to the study. This legislation would also reduce the amount of available pre-owned vehicles available, which in turn would increase auction values and vehicle pricing to consumers, due to simple supply and demand economics. Pre-owned vehicle sales are typically more profitable than new vehicle sales as dealers have more control of their profit margins and back-end products such as warranties can be an easier upsell.

There’s little doubt that the safety of consumers is the primary motive of the legislation. That being said, dealers are making efforts and completing recall repairs as efficiently as possible, as parts become available and consumer awareness efforts increase. The ripple effects this legislation may cause would almost certainly have an enormous financial impact on the automotive retail industry as a whole. Perhaps the solution isn’t to force dealers to sit on inventory, but rather to shift the focus away from sales and towards increased production and availability of parts needed to complete open recalls. This would allow dealers to complete open recall repairs faster, which would reduce the trade-in aversion some may experience. Whether or not this would accomplish the stated intent of the legislation is unknown. But one thing is certain -- this legislation could certainly negatively impact our industry.

Unless you’ve been in hibernation for the past few weeks, you’ve undoubtedly been barraged with news and opinions about the VW Recalls. Regardless of the intent of Volkswagen, it’s quite fascinating to observe the polarizing reactions by owners of the diesel engine carrying cars. No doubt the government regulators are going to compel Volkswagen to fix all of the vehicles. It’s possible that we could see a buyback. Ultimately though, there’s a battle going on. It’s not quite the battle you would think, however. I’m not here to rehash any of the many arguments regarding Volkswagen itself, but rather to relay an interesting dynamic that now exists in regards to these vehicles and the consumers who own them.

There were many consumers who bought these vehicles because they wanted to be more environmentally friendly without sacrificing power. Similar to electric and hybrid vehicle owners, these consumers wanted to feel as if they were making a difference in the world, however slight. As bonus, they were treated to some tax breaks and lower fuel bills. Chances are that there are plenty of these diesel owners who aren’t exactly thrilled now that it’s been revealed that rather than contribute to the health of the environment, they have actually been polluting it at up to 40 times higher than emissions standards. These consumers aren’t happy and many want nothing further to do with their vehicles.

In addition, diesel vehicles, which have historically held their resale value, are now seeing those values tank. According to an article in Wards Auto, values fell by as much as 7.9% vs. 3.5% for gasoline models.  The article told the story of a blogger in California who attempted to trade in a 2014 Jetta TDI with 14,000 miles on it and an MSRP of $30,550. CarMax offered him just $15,000. He tried to trade it in for another Volkswagen, and then a Subaru, and, according to the article, left feeling “treated like (he had) STDs.” The article stated that, logically, no dealer wants a bunch of trade-ins that they can’t retail. Makes sense to me.

Right now, there is this group of VW vehicle owners in the U.S. that want new vehicles. Dealers are hesitant to take in these diesel vehicles since they cannot retail them until the recall work is completed, or a buyback occurs. Given that the ultimate outcome is still unknown, it’s certainly logical to undervalue an undesirable trade-in.

Volkswagen has responded with the implementation of a guaranteed buy-back program for some 2.0 liter diesel engines, which offers dealers pre-crisis values for vehicles which can’t be sold within 60 days. This will certainly alleviate some concern from dealers. However, it’s possible that only dealers that can afford to hang on to vehicles for 60 days would be interested. Even so, a guaranteed buyback price would only be attractive if the dealer can take the car in below the buyback value, guaranteeing revenue whether the vehicle is retailed or sold back to VW. Regardless, this is a great move by Volkswagen to try and regain the trust of both their owners and dealers.

The one thing that I haven’t yet heard anything about is the incredible conquest opportunity this group of vehicle owners presents to other automakers. There’s no doubt in my mind that at least one OEM has had secret meetings discussing how to capitalize on this. Anytime you have a lot of people that want new cars, but need help getting there, a lot of creative minds start planning.

It will be interesting to see if any OEM (or dealer for that matter) decides to take the plunge and cherry pick this low hanging fruit.

Unless you’ve been in hibernation for the past few weeks, you’ve undoubtedly been barraged with news and opinions about the VW Recalls. Regardless of the intent of Volkswagen, it’s quite fascinating to observe the polarizing reactions by owners of the diesel engine carrying cars. No doubt the government regulators are going to compel Volkswagen to fix all of the vehicles. It’s possible that we could see a buyback. Ultimately though, there’s a battle going on. It’s not quite the battle you would think, however. I’m not here to rehash any of the many arguments regarding Volkswagen itself, but rather to relay an interesting dynamic that now exists in regards to these vehicles and the consumers who own them.

There were many consumers who bought these vehicles because they wanted to be more environmentally friendly without sacrificing power. Similar to electric and hybrid vehicle owners, these consumers wanted to feel as if they were making a difference in the world, however slight. As bonus, they were treated to some tax breaks and lower fuel bills. Chances are that there are plenty of these diesel owners who aren’t exactly thrilled now that it’s been revealed that rather than contribute to the health of the environment, they have actually been polluting it at up to 40 times higher than emissions standards. These consumers aren’t happy and many want nothing further to do with their vehicles.

In addition, diesel vehicles, which have historically held their resale value, are now seeing those values tank. According to an article in Wards Auto, values fell by as much as 7.9% vs. 3.5% for gasoline models.  The article told the story of a blogger in California who attempted to trade in a 2014 Jetta TDI with 14,000 miles on it and an MSRP of $30,550. CarMax offered him just $15,000. He tried to trade it in for another Volkswagen, and then a Subaru, and, according to the article, left feeling “treated like (he had) STDs.” The article stated that, logically, no dealer wants a bunch of trade-ins that they can’t retail. Makes sense to me.

Right now, there is this group of VW vehicle owners in the U.S. that want new vehicles. Dealers are hesitant to take in these diesel vehicles since they cannot retail them until the recall work is completed, or a buyback occurs. Given that the ultimate outcome is still unknown, it’s certainly logical to undervalue an undesirable trade-in.

Volkswagen has responded with the implementation of a guaranteed buy-back program for some 2.0 liter diesel engines, which offers dealers pre-crisis values for vehicles which can’t be sold within 60 days. This will certainly alleviate some concern from dealers. However, it’s possible that only dealers that can afford to hang on to vehicles for 60 days would be interested. Even so, a guaranteed buyback price would only be attractive if the dealer can take the car in below the buyback value, guaranteeing revenue whether the vehicle is retailed or sold back to VW. Regardless, this is a great move by Volkswagen to try and regain the trust of both their owners and dealers.

The one thing that I haven’t yet heard anything about is the incredible conquest opportunity this group of vehicle owners presents to other automakers. There’s no doubt in my mind that at least one OEM has had secret meetings discussing how to capitalize on this. Anytime you have a lot of people that want new cars, but need help getting there, a lot of creative minds start planning.

It will be interesting to see if any OEM (or dealer for that matter) decides to take the plunge and cherry pick this low hanging fruit.

While consumers regularly patronize independent repair facilities, dealers have always been able to rest assured that any recall repair work would remain in their hands. However, according to an article in Automotive News, that might be about to change. Seems as if the NHTSA is concerned with the speed at which dealerships can perform recall repairs - specifically ones involving the massive amounts of vehicles affected by the Takata airbag failures. Nationally, the recall repair completion rate sits at 22.5 percent, according to the article. With 19 million vehicles spanning 12 manufacturers that are subject to this replacement, the NHTSA is considering expanding recall repair services to include independent repairs shops. Of course, there are many challenges involved in making this effective, including the contractual obligation Takata has to only sell supplies to manufacturers. As well as manufacturers requiring that these repairs are completed at franchised dealers. These hurdles, however, could be trumped by a regulatory body concerned with expediting these repairs.

The concern here is that in allowing independents to perform this work, manufacturers have no control of the quality of the repair. In addition, this move could set a precedent that independents are included in future recall repair work, should this situation come to fruition. Perhaps this is one reason manufacturers are pushing dealers to expand their service departments so as to accommodate an increase in shop capacity. Either way, recall repairs – both large and small - are a staple of any dealer’s service department revenue. In giving independents the ability to perform recall repairs, the NHTSA would certainly be biting into revenue that dealership’s need to stay operational.

So what’s the solution?

Understandably, for the safety of consumer’s that own these vehicles, the regulatory body is focused on ensuring that they are repaired as quickly as possible. I’m sure that dealers would love to grab as much of this recall work as possible. However, many of the affected vehicles have gone through multiple owners throughout their lifespan –some are up to 10 years old. So, following a paper trail to identify their current owners is a challenge for the NHTSA.

If your dealership took the time and used resources to identify and reach out to these consumers through multiple channels, perhaps there would be an increase in the notification success rate. Then an action increase would follow (i.e. more customers coming in for the recall work) which could begin to alleviate the NHTSA concerns. In the end, all they really want is to expedite the completion of repairs. Take steps now to reach out to these owners. You’ll find that service revenue and sales opportunities increase. You could, perhaps, even help the automotive industry cut this unprecedented shift of recall repair work to independents.

While consumers regularly patronize independent repair facilities, dealers have always been able to rest assured that any recall repair work would remain in their hands. However, according to an article in Automotive News, that might be about to change. Seems as if the NHTSA is concerned with the speed at which dealerships can perform recall repairs - specifically ones involving the massive amounts of vehicles affected by the Takata airbag failures. Nationally, the recall repair completion rate sits at 22.5 percent, according to the article. With 19 million vehicles spanning 12 manufacturers that are subject to this replacement, the NHTSA is considering expanding recall repair services to include independent repairs shops. Of course, there are many challenges involved in making this effective, including the contractual obligation Takata has to only sell supplies to manufacturers. As well as manufacturers requiring that these repairs are completed at franchised dealers. These hurdles, however, could be trumped by a regulatory body concerned with expediting these repairs.

The concern here is that in allowing independents to perform this work, manufacturers have no control of the quality of the repair. In addition, this move could set a precedent that independents are included in future recall repair work, should this situation come to fruition. Perhaps this is one reason manufacturers are pushing dealers to expand their service departments so as to accommodate an increase in shop capacity. Either way, recall repairs – both large and small - are a staple of any dealer’s service department revenue. In giving independents the ability to perform recall repairs, the NHTSA would certainly be biting into revenue that dealership’s need to stay operational.

So what’s the solution?

Understandably, for the safety of consumer’s that own these vehicles, the regulatory body is focused on ensuring that they are repaired as quickly as possible. I’m sure that dealers would love to grab as much of this recall work as possible. However, many of the affected vehicles have gone through multiple owners throughout their lifespan –some are up to 10 years old. So, following a paper trail to identify their current owners is a challenge for the NHTSA.

If your dealership took the time and used resources to identify and reach out to these consumers through multiple channels, perhaps there would be an increase in the notification success rate. Then an action increase would follow (i.e. more customers coming in for the recall work) which could begin to alleviate the NHTSA concerns. In the end, all they really want is to expedite the completion of repairs. Take steps now to reach out to these owners. You’ll find that service revenue and sales opportunities increase. You could, perhaps, even help the automotive industry cut this unprecedented shift of recall repair work to independents.

Last month, in an effort to maximize recall completion percentages, FCA US announced that it would offer $100 gift cards, or extra trade incentives, to owners of recalled vehicles if they come in and get the work done. This is the perfect opportunity for FCA US dealers to piggyback on this OEM program to increase service revenue and capture more business. Undoubtedly, customers have experienced frustration in past attempts to get the recall work completed, simply due to lack of resources and parts availability, that’s if they were even aware of the recall in the first place. Now that the parts are readily available, these same customers are ripe for dealerships to reach out to.

However, to make the most of this opportunity, it helps to know that OEMs can only reach out to whatever owner they have listed in their databases for these recalled vehicles. Since some of these vehicles date back as far as 1993, chances are very good that these vehicles have switched hands at least once and are no longer with the original owner. It’s therefore very possible that the current owner has not been notified and is unaware of the recall. FCA US dealers would be wise to also make an effort to identify the current owners of these vehicles to identify eligibility for the $100 spiff. This could greatly increase the potential opportunity.

Another benefit that FCA US dealers should focus on is the increased trade value that FCA US will kick in for new vehicle purchases - up to $2,000 according to Automotive News. This double whammy presents opportunities to generate increased service revenue and also pick up additional sales. That customer with the 22 year old vehicle which has little value in a trade-in situation, could easily use that as a nice down payment -- rather than sell it privately for substantially less.

This program is a great opportunity for FCA US dealers. Those that act on it through an extensive outreach effort will undoubtedly benefit through increased business in both sales and service. Don’t delay -- every moment your dealership isn't contacting these consumers in your PMA is an opportunity for your competition to get a head start. There’s no better opportunity to gain new service and sales customers than when you can offer added value at no cost to your dealership, with the manufacturer footing the bill. Take advantage of this development and you will see that your efforts are well rewarded.

Last month, in an effort to maximize recall completion percentages, FCA US announced that it would offer $100 gift cards, or extra trade incentives, to owners of recalled vehicles if they come in and get the work done. This is the perfect opportunity for FCA US dealers to piggyback on this OEM program to increase service revenue and capture more business. Undoubtedly, customers have experienced frustration in past attempts to get the recall work completed, simply due to lack of resources and parts availability, that’s if they were even aware of the recall in the first place. Now that the parts are readily available, these same customers are ripe for dealerships to reach out to.

However, to make the most of this opportunity, it helps to know that OEMs can only reach out to whatever owner they have listed in their databases for these recalled vehicles. Since some of these vehicles date back as far as 1993, chances are very good that these vehicles have switched hands at least once and are no longer with the original owner. It’s therefore very possible that the current owner has not been notified and is unaware of the recall. FCA US dealers would be wise to also make an effort to identify the current owners of these vehicles to identify eligibility for the $100 spiff. This could greatly increase the potential opportunity.

Another benefit that FCA US dealers should focus on is the increased trade value that FCA US will kick in for new vehicle purchases - up to $2,000 according to Automotive News. This double whammy presents opportunities to generate increased service revenue and also pick up additional sales. That customer with the 22 year old vehicle which has little value in a trade-in situation, could easily use that as a nice down payment -- rather than sell it privately for substantially less.

This program is a great opportunity for FCA US dealers. Those that act on it through an extensive outreach effort will undoubtedly benefit through increased business in both sales and service. Don’t delay -- every moment your dealership isn't contacting these consumers in your PMA is an opportunity for your competition to get a head start. There’s no better opportunity to gain new service and sales customers than when you can offer added value at no cost to your dealership, with the manufacturer footing the bill. Take advantage of this development and you will see that your efforts are well rewarded.

In an unprecedented move, AutoNation CEO Mike Jackson recently announced that AutoNation will no longer sell any vehicle with an open recall – new or used. According to Automotive News, this effectively grounds up to 10 percent of AutoNation’s inventory.

AutoNation’s initiative could actually increase its brand image and make the chain more appealing to car shoppers. Knowing that any vehicle they choose to buy will not have any pre-existing issues that need to be repaired will certainly be viewed as a bonus. However, the man-power, time and loss of potential revenue required to implement it nationally could well be cumbersome to many dealers - especially smaller ones who have limited inventory. But, Jackson claims in the article that they are nearing completion of an automated system that will allow dealerships to identify and block the sale of any vehicle with an open recall. He has vowed to make this system available free of charge to any dealership that wants it.

While they can afford to replace this grounded inventory by acquiring up to 10,000 more pieces of inventory for their dealerships, many dealers won’t be able to financially follow suit. Accumulated flooring costs alone from aging inventory would be a hefty bill. In addition, it will become extremely important for dealerships to search for their retail-able pre-owned inventory within their own stores -- auction prices for used vehicles are certain to skyrocket with increased demand by dealers seeking to replace these grounded units.

This move provides a very strong unique selling proposition for AutoNation to relay to consumers. Jackson is certainly making a statement and there’s no doubt that this news will reach the public’s ears and make them take notice. In addition, it’s almost certain that supporters of recall legislation will rally behind this move and use it as an example to fortify their positions. It’s hard to believe that any consumers will object and dealers who do could find themselves in a precarious position -- caught between financial reality and public opinion. It will be interesting to watch this initiative develop and see how it affects AutoNation’s bottom line and also customer perception.