We’re at the end of May 2020, and the jobless rate in the United States has just surpassed 40 million, or 14.7%. That’s the highest it has been for nearly a century. Americans are in a tough spot, financially, and the uncertainty going forward is a problem that’s almost as significant.
Despite the depressed economy, the retail auto sales business is beginning to make a recovery. New and pre-owned car sales have been restored across most of the states, and new car sales buoyed by aggressive incentives. And although service departments have been open throughout the pandemic for much of the country, joblessness is bound to command a dynamic change.
Nationwide, labor rates at dealerships range from an average around $120 per hour to over $200 per hour. When a customer’s service reminder chimes at them as they collect unemployment checks, their internal dialog poses the question, “Can I afford to get my car serviced?”
Unquestionably, there will be a small but significant number of dealership service customers who delay their service visit or choose the low-cost oil change shop down the road rather than the service drive at their selling dealer. They simply can’t afford it – at least, they perceive the premium service option is unaffordable.
How do you combat it? It isn’t easy. To retain those customers as best as possible, a strategy might include lower door rates or a discount for those who can show proof of unemployment. It’s tricky to navigate because you don’t want to further humiliate the customer. It could be a sweeping rate change for a limited time also. Make sure to communicate it through social media and an email campaign, whatever you do.
When the sentiment in the American economy is apprehensive, car owners tend to hang onto their vehicles longer. COO of CarBrain, Marcin Ladowski, says, “In the beginning stages of reopening the economy, we’ve seen that it’s the affluent car owners that are still buying cars. People who don’t know when their next check is coming have been holding back on a replacement, even if they desperately need a new car.
“What we’re going to find is an American car fleet that’s aging, costing more to service, and in some cases, unsafe to be on the road.”
While it might seem counter-intuitive, service departments need customers to restart the vehicle lifecycle every five to eight years for a profitable department. Encouraging customers with aging vehicles to explore incentives on a new purchase might not help today’s repair bill, but it will help future sustainability.
For service departments, it can be challenging to achieve targets with aging cars. Owners tend to be frugal, limping their car along and willing to live with annoying conditions rather than fix them. Lower dollars per RO, lower overall GP, and an increase in declined services are possible.
At the service desk, customers should be helped with their older, lower-value cars just like any other customer when there’s no intention to switch cars. Offer services that help ensure longevity and reliability, products that enhance pride of ownership like accessories and detailing, and consider a high-mileage discount as a loyalty program.