When it comes to sales and service transactions in the retail automotive industry, a main strategy in acquiring new customers or repeat business has always been to offer discounts. Most auto dealer advertisements on television, radio, online, or delivered via any other medium, are based around price discounts. “Save $12,000 off MSRP on this truck,” or “Come in and get an oil change for just $19.99,” are common messages dealerships use to bring in new customers and reignite relationships with those who may have disconnected from the dealership. But are discounted promotions a sound long-term customer acquisition & retention strategy?

In a word, no.

How can this be? 

Well, people that “price-shop” aren’t doing so out of any thought of loyalty or future business potential. A more accurate adjective is… “Price-hopping.” The majority of consumers who take advantage of those special discount vehicle ads or service coupons generally have no loyalty to the dealership, nor any recognition of the value of servicing their vehicle at that particular dealership – other than the immediate offer of a good price. When they need service, these consumers simply choose the least expensive option. That level of price competitiveness is suicidal for dealerships hoping to compete with independent repair shops – they don’t have to invest in technician training, quality parts and state-of-the-art facilities. 

While dealers hope these newly acquired sales or service customers will stick around and return as a regular customer, sadly, for the most part, this strategy backfires. When these customers need service, they simply run to the dealership or independent that sent them a service coupon with the best offer. And this is why consumers tend to focus on price…it forces a continuous race to the bottom.

Sending out those discount messages costs money… no matter what channel the dealership uses. And, just like any marketing investment, you have to drive enough traffic into the dealership to recoup that investment and then ensure those customers return to the dealership in order to make the whole investment worthwhile.

You can only sell so many $20 oil changes (losing money each time) before it no longer makes financial sense to continue. 

Recall customers present a different opportunity that doesn’t require discounting services. These customers have no choice but to come in to the dealership for their repair. Perhaps there is a strategy that can bring in that recall work and produce an increase in additional services?

What if you could offer a discount that isn’t really one, but appears to be so? One that not only brings in new customers, but motivates them to spend additional money?

Recall marketing attracts new customers with no mention of a discount. The manufacturer pays for the repairs!  A good marketing strategy is to offer a discount on services to recall repair customers. Instead of sending marketing to random people (conquest), or existing customers trying to get them back in, consider sending discount offers to customers with existing recall repair work. These are a captive audience as they have to come into your dealership. AND, as they tend to have older vehicles, many end up needing additional repairs. If you arm these customers with a discount in hand before they show up, you don’t appear to be attempting to take advantage of them when you find additional work is needed. And it works!

Dealers who provide recall customers with discount cards in the range of $30-$50, motivate more than half of them (52%), to complete additional repairs at the time of the recall service.

Makes complete sense, right? Now the conversation has changed from “Come to me for a discount even though it might be inconvenient,” to “We know you’ve been inconvenienced by this recall so here’s a discount to use while you’re already here.” This isn’t viewed as a discount since the card is only presented when the customer arrives with a recall repair. And, as it’s not tied directly to the service, it’s never perceived as a discounted service, but rather as a value-added service, as a “sorry for your inconvenience.”

It’s time to take a good look at any customer acquisition marketing tactics which involve deep discounts. They tend to simply result in low retention, less profitability and a shop with service capacity mired in the quicksand of coupon customers.

However, offering discounts to encourage loyalty, retention and acquisition can be effective. If those discounts are used to continue a relationship. If they’re only used as a way to start one, it will probably only be a first date.

I frequently write about how, in my opinion, dealerships would be wise to expand their thinking and change attitudes towards recall customers … and not just recall customers, but all customers

The customer experience is key to building customer loyalty, increasing referrals and securing repeat business. It is also one of a dealership’s most important differentiators. But does that then mean you have to cater to every single customer, every single time? For those of you that shape the “customer culture” for the organization, should you always yield to those customers that push boundaries and argue just to get something for free?

In a word, no! Before you point out that I’m contradicting my first statement, let me explain.

A recent article in Forbes shares that many successful companies and leaders in customer service and the shopping experience have policies many view as counter to producing exceptional service. However, these companies are doing very well, easily retain their leadership profiles and are still revered by the people that matter most - consumers.

The article discusses the problem of how there is always a small subset of customers who try to take advantage of any business that bends over backwards to service customers. In such cases, organizational leaders have to consider the consequences and how it could affect their business.

A great example is shared involving Southwest Airlines, a company known for its exceptional customer service. While Southwest is willing to go above and beyond, there is a limit to how the company defines “beyond.” If it’s a customer’s birthday, airline staff may go on the loudspeaker and sing to them, but they will not throw confetti or inflate balloons. Such actions create a burden on the flight crew and the cleaning staff when preparing for the next flight. While the confetti might “wow” a single customer, it could cause a flight delay for countless others. At the end of the day, it’s just not worth it.

Customer experience is certainly a key factor in deciding where to shop. However, it does not make sense to go the extra mile for any one single customer if it negatively impacts the greater community of customers overall. Every business needs to know where that line is. Comping a repair invoice because of a bad experience costs little for the dealership, while it can preserve customer satisfaction and future revenue. Adjusting a sales contract because of a misunderstanding can accomplish the same thing.

But, sometimes the customer can cross a line in demands which can cause an undue burden on the dealership and negatively impact the experience of other customers. It also sets the tone for conflict resolution and invites future conflict. 

Now, at the same time, please keep in mind that there is a difference between a customer who has been wronged by your dealership and a customer upset by the circumstances of a recalls. These recall customers can be a little emotional and need a light touch and gentle hand. 

To the average consumer, you and the OEM might be one in the same – you’re the dealer, therefore you’re the OEM. Never distance yourself from the relationship with the OEM, but rather, establish that you are there to rectify the problem. 

In a recent survey by Recall Masters, most consumers view recalls as tolerable by-product of manufacturing. Sure, it’s still quite an annoyance for consumers, but that doesn’t translate into giving the shop away. Focus on what is fair and just based on the circumstances. Put yourself in the customer’s shoes – what’s a reasonable level of service to deliver to a customer that is inconvenienced by a recall? 

There is a difference between a customer who is justifiably upset due to being inconvenienced and the customer who simply just wants to make trouble and won’t be happy, no matter what you do.

If a customer comes in without an appointment and demands that their vehicle be serviced RIGHT NOW, while all your service bays are full, and the service lounge is overflowing with people waiting for their vehicles, what do you do? Do you service them and keep other customers, who have appointments, waiting? It really depends on the circumstances that present themselves at that particular time. But the point is that accommodating this one noisy, demanding customer at the expense of others may not be the most profitable.

Nobody’s perfect. Not even dealerships… or customers. Sometimes the customer isn’t right. Sometimes they are. The key is knowing when – and how much – to cater to a customer when things go badly.

Just like any other business, dealerships need to know what their customer experience goals are and follow them religiously. However, you also need to know where the line in the sand is and at what point it’s time to part ways.

There should be no reason for a customer to ask, “Where’s the manager?” While it will happen from time to time, your level of service, respect and attentiveness should be consistent throughout all layers of the organization.

And when it does happen, employees and managers need to know how to react, assess the situation and make the right decision. What might be “reasonable” to you may not be “reasonable” to a consumer. So, ask, “What seems to be a reasonable conclusion that would satisfy you?” Give the customer a chance to define what “reasonable” might be – they might just surprise you. 

There will be times when no solution at all will make a particular customer happy – and at that point, it is important to know how to gracefully handle the situation in a manner that is private and away from other customers.

It wasn’t too long ago that most dealers shunned recalled vehicle owners, describing the additional traffic as a nuisance, or they viewed them as consumers who occupied service bays that could be more profitable with other types of business. 

However, changes in OEM recall reimbursement policies, along with revenue data that indicates more than 50% of recall customers opt for customer-pay ROs, has forced dealers to take notice. The good news doesn’t stop there. Many dealers are also now warming up to the fact that service-to-sales is a viable source for additional units from recall customers.

In fact, service drive technology platforms have added complete service to sales components into their software to assist in the identification of customers that are a good potential source of front-line units and/or additional sales.

Why has the perception of recall traffic shifted? The answer is obvious – the data. The mischaracterization of recall traffic is easily overcome with data that demonstrates how recalled vehicle owners are not only reconnecting with the dealership and opting for additional customer pay services, but these consumers also look favorably upon the brand and the dealership. So much so, that they are open to purchasing their next new vehicle when they come in for the recall repair.

In our industry there is still somewhat of a stigma attached to these recall customers. After all, for consumers, dealing with a recall is not a pleasant experience. Historically, dealers have not rolled out the red carpet for them, nor have they had systems and processes in place to accommodate their needs. Unavailable parts, long wait times, poor scheduling, limited information, lack of transportation or loaner vehicles, and other mishaps have left these consumers feeling unwanted and left behind. As a result, many dealers view them as annoying or frustrating and not enough dealers put these feelings aside and focus on the opportunity that exists to take recall customers from service to sales.

I’ve been a bit of an evangelist for recall consumers and how dealerships can transform their operations to meet the needs of these recall customers. The fact is, if you do, there are huge rewards in both sales and service. It turns out that some of them end up buying their next car from the dealership that makes them feel valued at the time of recall repair.  In fact, it happens quite a lot and this business is certainly worth a better look into.

According to DMS data from Recall Masters, approximately 9.7% of recall customers end up buying another vehicle from that dealership. How can that be – aren’t these consumers frustrated with the brand that caused the recall in the first place? 

Late last year, Recall Masters conducted an in-depth consumer survey which has some very enlightening results. Surprisingly, recall customers don’t necessarily feel that the brand responsible for the recall is unreliable and will purchase the same brand from the same dealership. They don’t blame the manufacturer, they perceive it as simply the cost of owning a vehicle. Especially when their vehicle is an older model. At an average of 15,000 miles per year, a six-year old car could be expected to have around 90,000 miles on it. Most consumers accept that a vehicle with that many miles is likely to have problems and will probably be primed for a new vehicle if the figures work for them.

So, the true psychology of your recall customers is actually quite eye opening. Rather than rejecting these customers, those dealerships that work with their recall customers, and have processes in place to handle them properly, can win over these consumers and add more car sales to their bottom line.

It turns out that most consumers in fact characterize vehicle recalls as an acceptable part of the manufacturing process. They would rather be informed of potential dangers than have the OEM hide them. There’s also a clear correlation between vehicle purchase and model year. Recall customers tend to own vehicles that are more than six years old. Often, these vehicles have problems in addition to the recall which can lead to a large repair bill. Just like any other customer, if that is the case, the recall customer may simply opt to buy a different vehicle rather than deal with a recall AND a large repair bill. In addition, many more financing options exist these days for individuals who may not have qualified for a vehicle loan the last time they visited the dealership, which helps in the purchase process.

Factors such as the customer experience when dealing with recalls, along with every step of the interaction between notification and the customer’s arrival at your service department, can easily mean the difference between gaining consumer confidence and losing it. The dealership staff dictate the customer’s experience. Aside from proper training and tools, the employees need to buy-in to the fact that these customers represent future sales.

Relying on software and data to dictate potential service to sales candidates is great. But it is also important to ensure your provider can help you market to owners of vehicles six-years or older that have recalls and could potentially need additional repairs. Imagine using this as part of your conquest strategy. Wouldn’t you want to sell upwards of ten percent of recall customers a new vehicle?

Recall customers are just as valuable in the service-to-sales opportunity, and perhaps even more so, than any other service customer… if you know what to look for, how to treat them and your staff is staff is prepared to handle them correctly. And, just like any other customer. It’s much less expensive to sell an existing customer than it is to acquire a new one.

If you’re a movie fan, at some point, you will almost certainly have witnessed a scene where a villain sabotages a vehicle. The unsuspecting character gets into their car, fires up the engine and it explodes, dramatically. Or, perhaps the villain messes with the brakes, causing the main character to have a horrible crash. While these are familiar scenes out of a movie, the basic mechanics behind them are certainly possible in the real world.

In our everyday life we’re not dealing with villains who sabotage cars, nor manufacturers who intentionally install parts that can inflict harm on the public. But, the hidden dangers are real. There are a record number of recalled vehicles out on the road, leaving drivers in a position where they could very well end up in a situation just like in the movies. It’s these dangerous recalls, and the very real risk they pose, that is causing all of the commotion, emotion and legislation.

Enter technology. And things could quickly get even worse……

A recent article in Automotive News shares advice from a security specialist warning auto manufacturers about the imminent danger of vehicles which are effectively controlled more by computers than mechanics. According to the article, for every 1,800 lines of code, 80 percent have shown security vulnerabilities; estimated at 5,000 vulnerabilities in a connected vehicle and 15,000 in an autonomous vehicle. An autonomous vehicle, in fact, has 285 million more lines of code than a top-of-the-line Boeing 787 Dreamliner, making it “the most complex transportation platform existing.”

It’s been proven – and demonstrated - that connected and autonomous vehicles can be hacked into. Third-parties, unbeknownst to the driver, can take control of vital operational equipment including steering and brakes (amongst other things) from a remote location. This, in itself, is an issue that connected and autonomous vehicle designers should be looking into and finding immediate fixes, rather than waiting for these vehicles to be rolled out to the masses. Once on the roads, it could well be too late and result in injury or death to vehicle owners and other people on the road.

You don’t have to wait 10 years to see the impact of technology on vehicle safety. While lives are being saved through technology such as hands-free communication, brake assist and lane correction, there are also technologies that pose risks. The computerization of vehicles has caused more recalls than ever before. As reported in the 2017 State of Recalls, software/electronics-related recalls account for the second highest number of recalls (89), affecting the fourth highest number of vehicles (2.5 million). I don’t suggest that we slow down technological advancements in vehicles, only that we properly test these technologies and try to forecast which will lead to recalls.

If you think recalls – and the potential injuries or deaths – that occur because of a faulty airbag or ignition switch are scary, wait until someone decides to sit on the side of the highway with a laptop and hack into an autonomous vehicle, forcing it to drive off of a cliff.

There are no autonomous vehicles ready for mass sales today. But they are closer to hitting dealerships today than they were yesterday. The day is coming. As they put peoples’ lives in danger, recalls are something we should all, as an industry, work together to better anticipate, fix and prevent; not wait until a pattern emerges and then act. That’s how we ended up with this mess of recalls in the first place. 

Most of us in the automotive community are painfully aware that our nation is in the middle of a recall epidemic -- and will be for decades to come.  A low percentage of recall repair compliance pushes the numbers of vehicles on the road with open recalls ever higher, with no relief in sight.

The reality is that recalls are like the black plague for vehicles … while they do not kill that many humans – or at least not yet -- the casualty rate for vehicles keeps climbing almost daily. And legislators are frustrated.

If manufacturers and dealers can’t find an effective method to notify consumers and persuade them to repair their vehicles at an authorized dealership, then this recall train is on a collision course. Or, as one senator stated in a Consumer Reports article, the National Highway Traffic Safety Administration (NHTSA) “seems to be playing a game of regulatory whack-a-mole and twiddling its thumbs” in its enforcement efforts.

In my humble opinion, the biggest problem is that manufacturers and dealers aren’t making it easy for consumers to get their vehicles repaired. It’s not necessarily one or the other’s fault – whether that’s because of an ineffective customer notification process; or the inconvenience the customer suffers if they cannot use their vehicle for an extended period.  I realize this may come as a shock to my fellow colleagues in the industry, but consumers are very much interested in repairing their vehicle when a recall is identified. The problem is persuading consumers to go that last mile – visit the dealership. And, while most consumers view a visit to the dealership’s service department the same as they do a visit to the dealership, it’s easy to see why we’re stacking new recalls on top of existing unrepaired recalls. And the beat goes on. 

Getting back to the heart of the matter, it’s about creating an experience which resolves the problem for a customer who, more than likely, is annoyed to begin with because there was a recall. You certainly don’t want to make a difficult situation worse. There’s no point in inviting consumers to your dealership if your service department is not prepared to promptly repair the recall]. The fact is, dealers can’t afford to become a parking lot filled with customers’ recalled vehicles awaiting parts; and consumers can’t afford to be without transportation. Yet, according to Consumer Reports, only 6 out of 17 manufacturers have adequate loaner car policies in place to help their customers.

Do you think these recall customers would be more likely to bring their vehicles in if they had a more convenient solution, such as a loaner? My guess is, yes. But it’s more than just loaner cars. There are three main reasons recall customers don’t come into your dealership to get their recalls repaired.

1. They don’t know about the recall because they trashed the notice, thinking it was junk mail.
2. They tried to schedule the repair but were told the parts wouldn’t be available for months.
3. The parts were available, but the dealership had no loaner or rental cars available and the customer could not afford to be without transportation.

If we can solve these three points, legislators will stop drooling over this issue, attempting to take control of recall compliance effort, for the simple reason that recall compliance rates would improve. I don’t think that any of the parties involved – legislators, manufacturers, dealers, or even consumers – are against an improvement in recall rates.

I believe recall compliance rates would increase if manufacturers could provide dealerships with the financial support they need to give their customers a more convenient recall management process. Some consumers have been waiting as long as four years since the defect was first announced, and two years since NHTSA got involved.

One of these days – sooner or later – manufacturers and dealers won’t have a choice but to solve the problems which discourage consumers from getting these recalls repaired. Could it be as simple as manufacturers providing financial support for loaners and rentals; along with dealers and OEMS working together to contact owners – ensuring they get beyond the original owner to reach those elusive second, third, buyers, etc.? Will this finally make it somewhat convenient for customers to get their vehicles fixed?  

Only when these three things align will we see an increase in recall repair compliance. 

It’s a sad fact that current recall repair compliance rates are so abysmal. Most dealers know it., the Feds know it, state governments know it, and the manufacturers know it. Resolving this recall crisis starts with a notification. But, people simply don’t read recall notices, they discard them as junk mail.

For those that do read them, a second problem presents itself: getting to the dealership to have the recall repaired. Time is short, and consumers are busy. While vehicle owners may intend to get the recall fixed, the task slowly works its way onto the back burner and, inevitably, out of their minds, leaving the recall unrepaired. For the remaining few that are concerned and proactive, they often find themselves stuck in a quagmire of lack of parts and long waits, ending up frustrated.

One state, however, has implemented a recall repair notification process that may just help increase awareness of recall repairs among its vehicle owners: Maryland. A recent article on WTOP outlines a plan supported by a $220,000 grant that includes outstanding recall repairs on resident’s vehicle registration renewals. The edge that the State of Maryland has is obvious: it knows every registered vehicle and owner’s contact information. Maryland’s vehicle owners are unlikely to trash their registration renewal and, therefore, will also become aware of the recalls associated with those vehicles. Vehicles are an essential part of everyday life for most consumers. We need our vehicle to get to work, shuttle kids to school and soccer practice, etc.

Think about your last registration renewal. Did it say you were required to get your vehicle inspected? Yeah, everyone hates that. Why? Because it means you must find the time to go to an inspection station and complete that task. But you do it, right? And you do it because you know that if you don’t, you can’t renew your registration, which could result in a ticket. And nobody wants that.

While Maryland is these taking these steps to its notify citizens about vehicle recalls – which should prove to be successful since almost everyone reads their registration renewal invoices, follows the instructions and pays them – it stops one step short of alleviating and reducing the number of unsafe cars on the roads in Maryland.

The whole point of a vehicle inspection is to ensure the vehicle is safe to operate. Inspections look at several areas -- even small things such as if the license plate light or blinkers are operational. If Maryland (or any other state) wants to truly make an impact on recall repair compliance rates, they should consider making recall repairs mandatory during a vehicle inspection. Of course, there are some obstacles to overcome, such as notification period versus registration payment due dates, but that can be overcome by simply notifying citizens earlier and giving them ample time to have the repairs completed.

The only entities that currently have both the data (vehicle and owner information) and the ability (through legislation on the State level) to truly make an impact on recall repair compliance rates is individual states themselves. There are already plenty of conversations happening about this very subject as I write this. But, to date, no states have yet taken this to the next level and made it mandatory. And, based on the compliance rates, it’s about time they did. 

In 2014, due to safety concerns, Toyota issued a recall notice for a power inverter on its popular Toyota Prius. Nothing abnormal. But for the fact that, even after the recall was fixed, customers continued coming in with issues – hundreds of them – and that’s when Roger Hogan’s dealership decided enough was enough. According to an article on thedrive.com, he chose to voluntarily discontinue selling these models which resulted in an estimated $1 million worth of inventory parked on the lot. Roger was unwilling to sell these vehicles because he didn’t believe the recall fix would, in fact, make them safe for his customers.

Toyota responded, stating that the recall fix “lessens the likelihood of failure,” which simply wasn’t good enough for Hogan. He is adamant about keeping his customer’s safe. He voluntarily stopped selling these vehicles and, subsequently, filed a $100 million lawsuit against Toyota, claiming that the manufacturer failed to fix the problem. He also reached out to the National Highway Traffic Safety Administration (NHTSA).

Hogan’s actions could be viewed as admirable in an industry that cannot afford to “sit on inventory.”  Hogan decided to do what he believes is the right thing by refusing to put his customer’s lives in jeopardy; risking a significant financial loss by sitting on inventory. The exact action no dealer ever wants to take. Yet, he did it voluntarily. Why?

According to Mr. Hogan, “A recall is supposed to prevent the incident from happening. It’s not supposed to be you fix it after you’ve experienced the horrific event, you’re supposed to prevent that event from ever occurring… Why should you be allowed to put someone’s life in danger?”

In this case, the dealer saw that the recall repair was NOT solving the problem and, rather than continuing to sell the vehicles, shelved them in the best interest of the consumer. Recalls are a multi-level problem involving the OEM, consumers, dealers and government agencies. Most cannot be simply solved just by a manufacturer issuing a fix. In a perfect world, that would be great. But, just like in our government, there is a checks and balances system that involves the manufacturers, dealers and, ultimately, the affected consumers. I am not suggesting that this is a solution for every dealer, I am just highlighting an interesting occurrence in our recall world, one that we can all perhaps learn from.

It’s clear that Hogan made a decision which he believed placed customer safety as a priority. For that stance, it’s hard to be critical. In fact, he has my respect. He refused to sell vehicles that he feels are unsafe, despite completing the required recall repair. The ultimate goal should be to ensure all vehicles consumers drive are safe for the sake of the vehicle owners and other drivers on the roads. Did he do the right thing? The lawsuit will reveal whether Hogan went too far or if Toyota didn’t go far enough. Very interesting happenings going on.

For many consumer watchdog groups and dealers Hogan’s actions make him a figure of lore – a David among Goliaths, a superhero among Gotham’s villains. And, sometimes, we need a Batman to stand up to the powers that be to make that happen.

There are few things sales managers find more painful than looking into their CRM and finding unanswered sales leads -- whether those leads sat for hours or sometimes, days, each is a missed opportunity. That’s why there are so many outsourced BDC services that provide lead follow-up for dealers, ensuring customers receive a speedy, accurate response. And now, it seems that at least one OEM has decided to become a solution provider in this space.

On April 9, 2018, General Motors launched a “Dealer Sales E-mail Lead” program. According to a recent article in Automotive News, this outsourced BDC-type service is staffed 24-hours per day, 7 days a week, with highly trained specialists that excel at writing. Naturally, the focus is to ensure that any dealer customers who submit leads receive quick and accurate responses, no matter what time of day they are converting.

While this program is certainly something which some dealers may need, it’s unclear whether it will be more effective than any other outsourced BDC. Of course, with the power of the General Motors name behind it, one could assume these agents, in fact, have more product knowledge and better access to inventory than most non-OEM outsourced BDCs. But, there is one key component missing from GM’s lead follow-up… service leads.

If an OEM provides 24/7 communications to a dealership’s customers, the exclusion of service customers is a huge missing piece Here’s why. The OEM has all the information at its disposal regarding existing TSBs and recalls. I assume that they could even pull up a customer’s VIN via this program and have the entire service history of the vehicle, regardless of where it was purchased. Quickly and efficiently notifying customers about recalls is increasingly important in this media-saturated world, especially if the recall is safety-related.

Internet leads close at an abysmal rate. Yes, answering them faster can increase that percentage, but it will never come close to the percentage of customers your dealership could retain in service and potentially sell another vehicle to. Today’s customers want immediate service and prompt communication – is your dealership’s service department delivering that? If not, see what can be done to tighten up on customer communications and look for partners who can help you reach out to and retain those customers. 

Ideally, your service department should know the recall status of every vehicle that pulls into your service drive. This extra attention to the customer experience can provide your dealership with a competitive edge – the kind of differentiation that makes consumers loyal brand advocates and keeps them coming back for more. And that also includes vehicle sales.

I wish this GM program every success -- with a strong focus on responses that are personalized and relevant, dealers could certainly increase customer retention, safeguard their valuable service revenue and, at the same time, respond to sales leads. This would be the best all-around solution. However, when it comes to service, dealers need to be their own champions – for now!

There’s a huge push going on across the nation for subscription-based vehicle services.

First introduced by manufacturers, more than a few dealerships have rolled out similar services for their customers. The general concept is that a consumer can pay a flat-rate monthly fee to drive a vehicle of their choice. The payment includes everything from insurance to service, including maintenance for most wear-and-tear parts such as tires.

Consumers have the option to take the vehicle back to the dealership or manufacturer at any point (depending on the service) and switch it out for another vehicle. For example, suppose the consumer currently drives a sedan, but plans to go skiing or to the lake and needs an SUV for more comfortable travel and to tow their boat. With a subscription-based vehicle ownership plan, they can simply switch out the vehicle and continue making payments.

The interesting point here is what does this subscription service mean for the vehicle; what does it now become in the retail world? Depending on the state, when it comes to insurance, the vehicle needs to be titled to the driver. In subscription service cases, most likely the vehicle stays titled to the manufacturer or dealership, but the driver is covered through a special arrangement with the insurance company. When a driver swaps out a vehicle for another one, the previously driven vehicle re-enters the “fleet” of vehicles available for subscribers to choose from.

This is the same business model as car rental agencies.

Think about it. You could easily go to Enterprise or Hertz and rent a vehicle in perpetuity; or return it at your leisure and rent a different type of vehicle. Assuming you opt-in for the rental agencies insurance, your rental fee covers insurance and, because the vehicle belongs to the rental agency, if it needs new tires or brakes they replace them, not you.

So, this brings us to an interesting question: What are these vehicles legally considered? Once they pass from a dealership or manufacturer for the first time, there are just two options in reality: they are either used cars (for the second and every subsequent driver), or they are rental cars. In all practicality, there are no other options.

Why is this important? Well, at least one state’s auto dealer association recently banned subscription services (Indiana via House Bill 1195). In addition, federal law prohibits dealers from selling used cars with open recalls. There is similar legislation that prevents rental car agencies from renting cars with open recalls. I highly doubt that manufacturers will be exempt from these laws, even if they overcome the direct-to-consumer model that manufacturer subscription services mimic.

Regardless of how this all turns out, at least one good thing that will come out of it -- for those vehicles included in car-subscription services, recall compliance should greatly increase.

Vehicle subscription services are still too new for legislation to have analyzed and caught up with regulators and legislators. However, if ADA’s are opposed to manufacturers “renting” vehicles direct to consumers, fearing it will reduce sales for dealers, it’s only a matter of time before the status of these vehicles as far as “are they used or rentals,” will be answered. And this will only help make the roads safer for consumers. 

There is nothing more frustrating to a customer than being told a repair will take X amount of time - only to be informed later that it will take longer. To those who work in busy dealership service departments, this happens frequently. Customers come in for one thing and, during the multi-point inspection, additional issues are found. Or, as can sometimes be the case, a technician cannot quickly diagnose an issue.

How often have you had a customer arrive in the service drive saying something is wrong, but the technician cannot replicate it? It happens all the time. And it’s frustrating for both the customer and the dealership.  

OEMS have adopted technology in today’s vehicles at an incredible rate. And, most technicians simply don’t have the training to repair some of the problems that arise from this new technology. Most technicians weren’t trained to be electrical engineers or to approach vehicles more as computers than as purely mechanical machines. While technicians are adept with tools, wrenches and manuals, sometimes they need to communicate with expert manufacturer technicians to properly diagnose and fix a problem. That can take hours, effectively tying up a bay that could otherwise be productive.

Well, help is on the way. According to a recent article in Automotive News, two manufacturers are exploring ways to speed up the process, free up service bays and get customer vehicles back on the road faster.

Both Audi and Porsche are experimenting with new technologies which will allow instant communication between dealership technicians and expert manufacturer technicians. Audi plans to utilize mobile robots equipped with microphones and television screens enabling expert manufacturer techs to see, hear and interact with dealership techs in real-time. They can, in effect, look at the vehicle together and work in partnership to efficiently address the problem. In this case, the OEM technician no longer needs to rely on the dealership technician to explain the problem.

Porsche, on the other hand, has chosen the augmented reality route and is providing technicians with AR (augmented reality) glasses. This enables the same experience as Audi. But, in addition, also allows for overlaying specs and diagrams for the technicians while working on the vehicle.

The great thing about this instantaneous collaboration between OEMs and dealership technicians is that problems will be diagnosed and repaired faster, enabling the service department to run smoothly, more efficiently and at capacity.

Furthermore, I hope that this new technology enables expert manufacturer technicians to instantly alert a dealership technician about an open recall – perhaps even before a TSB or recall is widely disseminated to dealerships. This would reduce the time needed to repair that recall and increase overall compliance – which is a huge problem.

As vehicle manufacturers increasingly adopt and integrate more high-tech components into today’s vehicles, there is no doubt that dealership technicians will need assistance. These innovative solutions from Audi and Porsche should assist service departments in diagnosing, and repairing the problem at hand, as well as identifying that new recall or TSB a technician or service advisor isn’t yet aware of.

I certainly hope other manufacturers test and implement solutions that free up technicians and bays while, at the same time, ensure that any and all recall repairs are completed to keep consumer vehicles safe to operate.

These innovations are a win-win when it comes to dealership shop revenue capabilities and customer service satisfaction. As technology continues to develop – which it is at an incredible rate – both dealers and manufacturers should be taking advantage of it. That’s the simplest route to a bright future filled with happy customers, busy technicians and efficient shop capacity.