Spread The Word

By: Jeff Hatch

May 10, 2017

To Succeed in the Lucrative CPO Market, You Need to Make a Commitment – and Make Sure Your Customers Know It

As many as 60 percent of all pre-owned customers are interested in seeing a certified vehicle, and the CPO market continues to grow – 2016 was the sixth consecutive year of record CPO sales. 

Those statistics lead to an important question dealers should be asking themselves: “How can I get my share of that segment?” 

It’s simple. Find a certified pre-owned program you like and start advertising. 

When starting a certified pre-owned program, it is best to remember a saying I once read in a fortune cookie: “Who saw the antelope jump in the forest?” 

That might sound silly, but it points out that while few of us will ever see an antelope jump in the forest, everyone can visualize it because they have read and seen pictures. No event can be widely known and accepted unless it is publicized with a message broadcast to the public.

That’s the message of that supposedly ancient Chinese proverb. If you want your program to succeed, you must be ready to broadcast your commitment loudly and constantly to everyone.

When deciding on a CPO program, the gains must be weighed against the costs. And the best way to achieve a positive in that equation is to make a full commitment to the program. 

Your commitment needs to be accepted by everyone involved – your employees, customers and even the people you get your inventory from. 

In order to broadcast that commitment, you must analyze why you are starting this project in the first place. 

In the car business it is always about profit, which usually comes from selling more vehicles or making more on the ones that we sell. For dealers, that is the purpose of a certified pre-owned program.

The logical first step is to analyze what commitment you are making. 

In some cases a dealer will be changing his market niche to a certified pre-owned inventory or elevating his inventory to more current models. Most dealers, though, will still be acquiring the same type of inventory, and will most certainly be getting it from the same places. 

For them, the commitment isn’t to better cars or inventory. Rather, it’s to providing a better ownership experience for the customer. 

CPO accomplishes that by backing what customers purchase in a manner that gives them the peace of mind that they did the right thing by buying the vehicle from the dealer that they purchased from. 

That’s a long way of saying the commitment is just the right thing to do.

And if you are going to do the right thing, you might as well do it the right way. When looking at CPO, you need to have a program that follows three main criteria in governing the quality of the warranty. 

First, you must have an administrator that has the capacity and desire to pay claims promptly. That is easily ascertained by looking at the administrator’s other customers. You’ll want to partner with someone who has partnered with the giants in your industry. 

Second, the idea of CPO is to sell more cars and create more repeat business. That means the CPO program you commit to must have an unremitting drive to customer service. 

Remember, the customers who interact with your claims administrator are going to be in what is for them a crisis situation. When it comes to encouraging repeat business, it’s here the difference in warranty companies is felt. 

The third criterion is name recognition. Not simply because the name is recognized, but because the name is known or can be explained as synonymous with high ethics in the used car business. 

Once you have found that, you’ll have something worth broadcasting.  

When a dealer makes a commitment to any program, it is critical to the success of the program to broadcast it to the widest audience. The beginnings of success depend on how this project is presented to all parties. 

Studies show that resolutions of any kind made in quiet are not as successful as those that are written, posted and told to as many people as possible.

Kevin Corley, owner of Second Chance Auto in Charleston, S.C., recently made the CPO commitment. He chose to use the NIADA Certified Pre-Owned program because it provided the necessary three criteria.

Since General Motors and Microsoft had done due diligence on the administrator, he felt he could trust it to pay claims. He found the principles NIADA was founded on mirrored his. And he saw the NIADA shield would be recognizable in his advertising media, helping to brand him as a certified pre-owned dealer.  

Once Corley had made his commitment, he wanted to make sure that everyone knew what he now represented at his car lot. 

“Kevin is so excited about representing this program,” said Mike Sims, an NIADA CPO program representative, “that we actually baked a cake.” 

Corley demonstrated his commitment in a meeting with his entire company. In that meeting, he expressed his wish for the employees to embrace the program – and he capped the meeting with the aforementioned NIADA-themed cake. 

He explained that when you start a program with a special event like the cake ceremony, the employees know it is different – and a very important.

Once he had announced the program to his people, Corley immediately wanted to get the word out to his clients. So he broadcast the announcement of his new program on his number one marketing tool, Facebook Live, from which he can broadcast his entire operation to the customers – from coming off the truck through make-ready to on the lot. 

The result?

“We had 363 likes from broadcasting the cake ceremony in a matter of minutes,” said Corley. “The thing is, if they are watching on Facebook Live, they are in the market to buy a car, whether they know it or not.” 

Second Chance Finance Manager Milan Edwards said the Facebook broadcasts make a big impact on consumers.

“By the time customers watch a car go through the inspection process – the cleanup process, even pulling the car off of the truck – on the Facebook Live broadcast, they are ready to belong to something special,” she said. 

“Since the store has been involved with NIADA Certified Pre-Owned, we’ve sold 26 vehicles. Nine of those were CPO deals that would have gone somewhere else had we not notified our constituents of our commitment to this program.” 

Donald Holt, Edwards’ associate in the finance department, pointed out that only one of those nine early CPO sales was hesitant to extend the warranty protection with an extended service contract.

“And her husband was a mechanic,” he said. “Once they know the program, it is not selling to get them to do the upsell. It’s just filling out the paper work.”

Making sure the public knows about your commitment to their vehicle purchase is important in driving customers from the Internet to your car lot. 

Having vehicles marked as certified pre-owned on your dealership website is a good start. A deeper dive is using a CPO program that coordinates with websites such as Carfax or eBay. When you post your CPOs and they show up at the top of the selection criteria because of certification, it allows you to charge into the growing millennial CPO market.

Dealers can also broadcast their commitment to CPO by emphasizing the program in their lot decorations.

“NIADA Certified is actually a full marketing program that allows the dealer to maximize exposure to the public of his certified pre-owned program,” Sims said, including numerous marketing materials to dress the lot for the success of the program. 

Corley’s business partner Derrick Middleton said the pole banners provided by the NIADA program “create an atmosphere or excitement and tell the customer we have cars that have been given special consideration.”

And that excitement, combined with a strong CPO program, can give independent dealers a boost in their competition with franchise dealers for market share, said Natalie Suarez, national director of the NIADA program for administrator Warrantech. 

“Those dealers who fully commit to a program such as this find that the more they promote the certified pre-owned concept, the easier it is to compete with the local new vehicle franchises for certified buyers,” she said. 

“When they are part of the NIADA program and use their online and on-lot methods of marketing their vehicle as certified, dealers see an increase in all traffic – phone, Internet, appointment and walk up.” 

Dealers who have been successful in implementing programs such as NIADA’s say it is extremely important to get the information out to your potential customers before they are looking so they know they can find a certified pre-owned vehicle on your lot. 

And, they say, it is equally important to continue to broadcast the program’s benefits once the customer is on the lot. 

Auction Direct USA is one of the nation’s largest used vehicle operations, with stores in Rochester, N.Y., Raleigh, N.C., and Jacksonville, Fla. In 2016, its managing partner, Todd Hoagey, was named NIADA’s CPO Dealer of the Year. 

Broadcasting its commitment to NIADA Certified Pre-Owned has been incorporated into the dealership’s sales system. 

When customers arrive at Auction Direct they are met by a salesperson who “walks their wall.” The wall shows the story of the store, including how and why Auction Direct adopted its marketing system. And it all starts with the commitment the store makes to the customer through the CPO program. 

“Starting the sales process with the certified pre-owned explanation is integral in establishing a trust between us and our customers,” Hoagey said. “It makes it clear up front that this store is special and the customer can feel safe with our process.” 

One way to advertise the program is to dress the cars on the lot to identify them as having gone through the 125-point inspection required for NIADA certification. That can be accomplished with windshield banners that are visible from the street, as well as mirror hangtags that remind customers the vehicle has been through a special process and therefore is provided with coverage that most pre-owned vehicles don’t have. 

So who saw the antelope jump in the forest? 

Almost no one. But through broadcasting the beauty of the event, everyone knows about it. 

When you broadcast in all of your media – Internet, newspaper and radio/TV ads, on your cars, in your sales process – you can get that all-important bump in sales. 

“Once customers know about this program, why would they shop anywhere else?” Second Chance Auto’s Milan Edwards said. 

The key is making sure your potential customers know about the program and your commitment to their ownership experience. That includes consistent messaging and using identifiable logos that flow throughout your advertising, allowing you to be successful by branding yourself as a dealer customers can count on.   

ABOUT THE AUTHOR: William Carr is a longtime auto industry veteran in sales, management and training and a regional training manager for Warrantech Automotive, Inc. administrator of the NIADA Certified Pre-Owned program. For more information on the NIADA CPO program, visit www.niadacertified.com/dealers

This article originally appeared in the May 2017 edition of Used Car Dealer magazine and can be found online at: http://bit.ly/2q1lEsz 

Filed Under: automotive, Carr, certified, CPO, dealership, NIADA, pre-owned, sales, William

Advantage: Independent

By: Jeff Hatch

July 09, 2016

With NIADA CPO and the Internet Creating a Level Playing Field, Independent Dealers’ Low Overhead Gives Them an Edge in the Used Car Market

Last year was one of the best retail sales years in car business history. And looking forward, sales in 2016 and beyond should benefit from the wave of full employment, low interest rates and low fuel prices to continue knocking down strong years. So where does the independent operator fit into this sales boom? How do owners in this segment of the market maximize their dealership value? 

As new car franchises hit record numbers, the trend creates opportunities for independent sales organizations. But the question is: How can you capitalize on those opportunities when they are presented?

The Internet allows independent dealers, no matter how small, to compete on an even playing field with mega-franchises. 

It is important to know that new car franchises look for one-to-one new-to-used sales. They’re currently running at about .02-to-one used-to-new, according to NADA data. 

With used car prices at an all-time high, according to Edmunds.com, and new car dealers renewing their efforts to conquest used car customers, independent operators needs to be prepared for the future — not only to gain market share, but to keep what they have.  

On the Internet, the small operation is the same size as the largest dealer. If an independent operator takes advantage of his opportunities while diminishing his competition’s added value, the independent dealership can compete very well with new vehicle showrooms. 

When looking at how to best capture a percentage of sales generated from the big-box retailers, it is always wise to examine the advantages and disadvantages of your position versus local new car dealerships. 

The biggest and most obvious difference is the facility. New car franchises are required by their OEMs to meet certain specifications in order to remain a franchisee. 

Those cathedrals to car sales look great and attract customers, but in the final analysis add nothing to the value of the vehicle purchased. In addition to that zero value, the future and present state of the auto industry relies heavily on Internet sales, which makes these structures almost obsolete. 

The costs of building and maintaining the facilities at most franchise lots are astronomical. And because the new car business is so competitive, the franchise stores’ profits from their new vehicle departments are minimal. That means the costs must be paid for through used car sales, the service department and increasingly higher profits in service contracts. 

The overhead advantage works in favor of the independent used car dealer.

This is the best news for independent dealers. A small lot can be just as spectacular as the largest franchise on the web. 

If the independent dealer can get his message out to customers, he has a chance to take one or two new vehicle customers and some used customers from a larger dealership. 

One very important statistic to keep in mind is that a new car purchaser will consider a used vehicle instead 59 percent of the time – if the used vehicle is certified. 

That creates an opportunity for a used car dealer to capture new car business. 

It means if the new car market consists of 1,000 people per month in your area, 590 of them would look at a good certified pre-owned vehicle. Attracting 1 percent of those customers through the Internet translates to six vehicle sales a month. 

The great change that the Internet has brought is a larger marketplace and a greater opportunity for used vehicle operations to cash in.

Unfortunately for new car franchises, the Internet really serves to drive profits down in the new vehicle world because of the competitive advantage it gives the customer. 

A new vehicle at one lot is no different than the one down the street. Customers can locate and negotiate its purchase at multiple lots, pitting one franchise dealer against the other and putting the customer in a power position. 

Not so with used vehicles. They are all different because of miles and vehicle condition, which makes location a much more important factor in the shopping experience. 

That is why eBay retailers like NIADA president Frank Fuzy of Century Motors of South Florida can get customers from all over the country. The shopping those customers do is powered by the way a vehicle looks and the way it is described on the Internet. 

If a vehicle is clean and in front-row-ready condition — featured with an appealing background, shown from all angles inside and out, badged with vehicle certification, and presented with a limited warranty and an explanation of the meaning of CPO — an independent with the smallest lot will be able to compete for a customer’s attention against the largest retailers.

Many small operations don’t put the effort into the photos they post on the Internet. They need to realize it is the equivalent of the showroom of the ’60s and ’70s and should be thought of as a display case. 

Large dealer groups put a huge emphasis on their web display in their marketing efforts, making sure that the vehicles and the ambience of the background appeals to visiting customers. 

Typically, social media is where customers first see a CPO program’s commitment to quality. If customers don’t feel the program meets a high standard, they will not feel safe doing business with that dealership.

Participating in CPO programs offered by organizations like NIADA announces your commitment to integrity and allows your website to display certified units, which shows your commitment to the customer and the industry. 

But simply being a member of such a program is not enough. You need to broadcast what that membership means so customers become informed enough to tell the difference between an NIADA member and other car lots. 

Another thing to keep in mind is new vehicle dealerships really have little advantage in inventory. They might carry more units than a smaller store, but independents should be able to be more responsive to the customer’s needs. 

Everybody pays the same price for automobiles. Whether it’s purchased at the auction, traded in for a new vehicle or bought wholesale, a car is worth what it’s worth. 

The real advantage for a dealer is the ability to have vehicles certified by a national source. Usually, that means a factory certification program administered by a manufacturer that has invested millions of dollars into creating a certified market. In doing so, it has created a niche in the customer base for people who have a prejudice toward buying a vehicle that is certified and will not look at anything else. 

Certified vehicles now make up 65 percent of the used vehicles sold by franchise dealers. That means any car lot that does not have some certification program is only going to be a viable alternative to 35 percent of the used vehicle market. 

So how do you certify your vehicles? 

There are really three ways — through the factory, a dealer-branded program or a third-party program. 

Factory dealerships are strongly encouraged to certify every vehicle through their OEM’s programs. While those are very good certifications, there is no proof customers put any more credibility in those programs than they assign to third-party or dealer-branded programs. 

Customers know they want certified even though they may not be fully aware of what that means. What customers are really looking for is tangible evidence that the certification is meaningful and that there is a credible program behind it. 

Factories have spent millions making customers aware of certification and the value of a certified vehicle. They have even tried to tie certifications to new vehicle franchises. 

But that can work to an independent dealer’s advantage.

Factory programs are very specific as to what is certifiable, making their certified vehicles cost more in reconditioning than the average trade-in. And OEM programs get into distinguishing between vehicles with or without matching tires or if they have factory-installed floor mats, when customers really just care about the vehicles being mechanically sound.

A customer might not be buying a certified vehicle because the program has a limited warranty attached, but a limited warranty offers proof, from the customer’s point of view, that the certified vehicle should command a higher price. 

Customers feel if the entity issuing the certification is also backing it with a limited warranty, that entity must believe in the certification process.

To be a credible certification program, there has to be reputable company paying the bills for customer repairs. A strong financial backer, along with coverage that protects customers from the fear of buying someone else’s problem, offers the peace of mind customers are looking for when they decide to purchase a certified vehicle.

Factory stores are forced or strongly encouraged to go with factory-backed certification programs. But recently, more and more progressive dealers like Huntington Honda in Long Island, N.Y., have elected to venture off with their own dealer-branded programs. 

Groups like this have seen how the high costs of factory programs have limited their profits without providing a significant benefit over other nationally recognized programs. 

The best known and most respected of the nationally recognized certification programs outside of the OEM brands is the NIADA Certified Pre-Owned Program. 

Frank Fuzy credits the NIADA CPO program for giving him the credibility that has helped him sell vehicles on eBay. 

Frank is the king of eBay sales – he sells more cars on eBay using the program than any other dealership. At the 2015 NIADA Convention and Expo, Fuzy said he hopes more stores don’t start using the NIADA CPO program because he competes nationally on the Internet and believes the program gives him an advantage he doesn’t want to give up. 

Teaming with NIADA removes the biggest advantage a new car franchise has. Statistics show that 65 percent of all people buy a car where they get it repaired. So when your customers are using your warranty, you can direct them to the service department where you want them to have their repairs completed. 

The NIADA CPO Program allows independents to bring customers into their service area, creating another profit center as the warranty pays for retail parts and labor. 

The greatest equalizer in the history of the car business is the Internet. When automobiles are presented on the Internet with NIADA CPO certification and a limited warranty, they stand out from the fog and clutter of vehicles advertised on the social media outlets. 

The dealer or independent operator who knows how to take advantage of the social media setting will be able to excel in the new environment we find ourselves in. 

For example, when Fuzy advertises on the Internet that he certifies his vehicles with the NIADA CPO program, he gains an advantage in several ways. 

First, his organization is saying it has an agreement with a national organization that was founded on ethical business practices. Plus the program is backed by Warrantech, a wholly owned subsidiary of AmTrust Financial, which is A+ rated and accredited by the Better Business Bureau. 

That gives Fuzy’s customers peace of mind and an affordable program that provides rental vehicle benefits, towing and trip interruption coverage equal to or better than most megastores.

Using a program like NIADA’s allows an independent broker to take advantage of the cost of maintaining the lot he has as opposed to a new car franchise’s Taj Mahal.

Simultaneously, it allows for more gross profit and faster turn of inventory while alleviating the risk that a customer assumes. 

Risk is what drives the used vehicle industry. The more risk a customer is willing to accept, the less the vehicle will cost. A 12-year-old vehicle with 100,000 miles is much less expensive to purchase than a new vehicle because of the risk in ownership. 

That risk is mostly due to repair costs, which can be offset with a CPO program like the one offered by NIADA. 

Many experts foresee a golden age in vehicle sales over the next 10 years, with predictions that average annual new vehicle sales will reach 17.5 million. Sales of that volume would make it the best sales period in the history of the auto industry. 

Independent used vehicle operations that take the time to position themselves at the top of the pyramid and are prepared to take a portion of new car franchises’ business will find this a very profitable period. 

By partnering with the right organizations and following through with what you promise, you can use the next 10 years to establish your dealership as a dominant force in the market.

ABOUT THE AUTHOR: William Carr is a regional training manager for Warrantech Automotive, Inc., and a longtime auto industry veteran in sales, management and training. For more information on the NIADA CPO program, visit www.niadacertified.com/dealers. 

This article originally appeared in the July 2016 edition of Used Car Dealer magazine and can be found online at: http://www.usedcardealermagazine.com/i/698409-jul-2016/30 

Filed Under: AmTrust, automotive, certified, CPO, dealers, independent, NIADA, pre-owned, Warrantech

Warrantech Featured In The March Issue of Dealerscope Magazine

By: Jeff Hatch

March 28, 2016

Guy Koenig, Chief Strategic Officer for Warrantech, recently took part in Dealerscope magazine’s roundtable discussion regarding companies that sell extended service plan programs to consumers through retailers. Here is what he had to say in response to the following question:  

"What major initiatives/strategies has your company planned to help CE and appliance dealers make more money from warranty sales in 2016?"

Warrantech continues to develop unique products and solutions that meet the changing needs and demands of our retail partners and their customers. Most recently, significant focus has been placed on launching our Connected Life program to provide coverage and services for multiple devices under a single protection plan. This customizable program encapsulates everything from automotive, mobile devices, consumer electronics, and consumer appliances. The flexibility of our solutions gives CE and Appliance dealers an opportunity to expand their markets and reach new profit levels, while providing their customers with added value on their most important purchases.

Visit dealerscope.com to read the article in its entirety and for more industry insight. 

And be sure to follow Warrantech on Facebook, Twitter and LinkedIn so you can keep up to date on company initiatives as they happen. 

Filed Under: automotive, connected, Dealerscope, devices, life, mobile, products, solutions, Warrantech

Vehicle Service Contracts Remain A Popular Choice Thanks To Their Flexibility

By: Jeff Hatch

February 23, 2016

Having a vehicle service contract (VSC) gives you added peace of mind while taking away the risk of an expensive and unexpected repair bill. But as vehicle design starts to evolve even further, the appeal of a VSC continues to change as well.  

More dealerships are finding that consumers are less worried about mechanical failure and are more focused on in-vehicle technology. That’s not to say that there’s not a need for component coverage on items such as the transmission and engine — far from it. It’s just that as cars are being built with more electronics and connectivity features, items like navigation systems and Bluetooth technology are becoming more of a focus for customers interested in a VSC.     

In a 2014 study by the Consumer Electronics Association (CEA), in-vehicle technology was cited as an important factor when purchasing a new vehicle for more than half (59 percent) of U.S. drivers. The same study also found that two in five consumers (42 percent) stated that they intended to buy an in-vehicle technology device or accessory within a year. 

Fast forwarding to the present day, another study was just released that helps provide even further insight into VSC/automotive purchasing habits. According to a recent DealerRater survey question supplied by Automotive News, 30 percent of consumers said that they bought a service contract on their most recent vehicle purchase. Taking a deeper dive, here are some additional findings from the survey:

26 percent of new-vehicle buyers purchased service contracts 
40 percent of used-vehicle buyers purchased service contracts
33 percent of consumers who visited a dealership for service bought a service contract 
21 percent of all respondents purchased GAP protection, which was the next best-selling F&I product 
12 percent or less of all respondents purchased F&I products such as tire and wheel, prepaid maintenance, paint protection and coverage for alarm systems 

Advanced features and safety systems cost more to replace if they malfunction, so a VSC makes good sense if your vehicle features the latest state-of-the-art technology. And even if it doesn’t, a service contract is still a great option for covering the major components of your vehicle. Plus, a VSC gives your vehicle greater resale value. If you plan on selling your car or truck after a few years, keep in mind that you can get a higher price for it if it’s backed by a VSC. 

So, yes, car design has evolved and will continue to do so. But on the flipside, so have VSCs. Service plans have become more flexible, which allows every consumer to find the perfect fit for their budget and the way they drive. And this key advantage in how VSCs are designed allows consumers to stay out of the red and on the road a lot longer.  

Filed Under: automotive, consumer, contract, resale, service, technology, value, vehicle, VSC

Tips For Buying A Vehicle Service Contract

By: Jeff Hatch

December 17, 2014

A vehicle service contract (VSC) is a smart investment. It can help cover the cost of unexpected repairs and keep your vehicle running at its best. But how do you know if the plan is right for you? Here are a few questions you can ask your VSC salesperson to make sure you know exactly what you’re getting.  

How Much Does The VSC Cost?
Obviously, money is one of the most important factors in the decision-making process. Is your vehicle worth the investment? If so, you’ll want more coverage, which means more money. However, the amount you pay now could add up to hundreds of dollars in savings later. 

What Does The VSC Cover?
Consider your driving habits and the make and model of your vehicle. For instance, if the company who manufactures your car is known for the quality of their interior components and you plan on keeping your vehicle in a garage, then you probably don’t need paint and fabric protection as part of your VSC. 

How Long Does The VSC Last?
Again, the way you drive has a big impact. If you plan on keeping the vehicle for several years or know you’ll be spending a lot of time on the road, then having a VSC makes a lot of sense. You’ll also want to know if your vehicle is currently under a manufacturer’s warranty since the VSC typically goes into effect after the manufacturer’s warranty expires.

Who Backs The VSC?
Make sure that the company behind your plan is reputable. Some good indicators to help determine credibility include an A.M. Best rating, which demonstrates financial strength and stability, and a Better Business Bureau rating, which assesses the company’s business practices. Also, look at how long the company has been in business and examine their background.

How Are Services And Claims Handled?
Find out if the company has a network of service providers. Are they in your area and readily available to work on your vehicle? Once this has been determined, inquire about claim submission and processing. Can you submit claims online? Does the company have a reliable customer service department to assist you? And do they provide fast and convenient service to help get you back on the road as soon as possible?

Don’t Be Afraid To Ask Any Other Questions You Might Have
You should never feel pressured into purchasing coverage that you don’t understand. If there is anything about your vehicle service contract that doesn’t make sense to you, don’t hesitate to ask. Always remember, it is the salesperson’s responsibility to assist you. If you don’t feel that you are getting the help you need to make a proper purchasing decision regarding your VSC, then you probably aren’t going to get the right help should something go wrong with your vehicle.

Got a question about one of our vehicle service contracts? Contact us online at https://warrantech.com/contact-us/ or call at 800.833.8801. We’re happy to help.

Filed Under: A.M., automotive, Best, Better, Bureau, Business, claims, contract, service, vehicle, VSC, Warrantech