Customer Care

Cash for Clunkers is an Opportunity for Fixed Ops

The Car Allowance Rebate System (“CARS”, otherwise known as “Cash for Clunkers”) provides a one-time credit of either $3,500 or $4,500 dollars (plus scrap value) to a consumer purchasing or leasing a new, more fuel efficient vehicle. While some may see this as an opportunity for improved new vehicle sales, I see it as an opportunity for Fixed Ops as well — provided it is handled correctly.

While the final details will be released on July 23rd, here are some of the things we currently know:

• Have been manufactured less than 25 years before the date you trade it in;
• Have a “new” combined city/highway fuel economy of 18 miles per gallon or less;
• Be in drivable condition;
• Be continuously insured and registered to the same owner for the full year preceding the trade-in;
• The trade-in vehicle must have been manufactured not earlier than 25 years before the date of trade in and, in the case of a category 3 vehicle (work trucks 6,000-10,000GVW) must also have been manufactured not later than model year 2001;
• The program runs until November 1, 2009, or until funds budgeted are exhausted;
• The replacement new vehicle’s manufacturer suggested retail price cannot exceed $45,000;
• Dealers are not obligated to register and participate in the program, but those that do must offer the program to any consumer whose vehicle meets qualifying criteria.

How will this be an opportunity for Fixed Operations? Let’s read between the lines:

• Vehicles manufactured prior to July 23, 1984 do not qualify for the program. While most suburban metropolitan areas will have very few of these older vehicles, more will be found in either rural, economically depressed, or low income urban environments;
• “Drag it in, tow it in” vehicles won’t qualify;
• Vehicles currently “up on blocks” won’t qualify;
• A vehicle with defective brakes, a failed clutch, or an engine failure will not qualify;
• “Econoboxes” of all years, makes and models do not qualify—and this is the vast majority of vehicles on the road today — regardless of whether they leak oil, fail safety inspections, or have emissions failures — simply because their fuel economy standards at time of purchase exceed the maximum limit;
• The economic “window of opportunity” is extremely narrow – from July 23rd to November 1st, 2009. Only those prepared to purchase NOW will be able to utilize the program;
• Trade-in negotiation will be virtually non-existent, as the vehicle being surrendered must be destroyed and not resold. Vehicles will only be worth scrap value.

Translation:
The buying public will be very confused about their options, and many will be disappointed when they come to your showroom and learn the truth for their given situation. This provides an opportunity for your sales department to provide a “T.O.” to sell the features and benefits of your Service and Parts operation. Here are some high points to consider in building an action plan:

• First and foremost, decide to have a written-out plan of action agreed to between Service, Parts, and Sales about what you will and will not do. There will be consumers visiting your store looking for a “free lunch” (or something close to it). The consumer looking to trade-in her Honda Accord under the program most likely will be very disappointed when your staff tells her the vehicle does not qualify — and will direct that disappointment at you, not the lawmakers.
• Tread very lightly about the direction in which you assist her (be it through offering a pre-owned vehicle or through your service department). This one action will determine if you build a customer relationship.
• Plan a “Cash for Clunkers Car Care Clinic”. I am certain you are gearing up advertising to take advantage of CARS…add this feature to your plans, and proactively reach out to consumers who might be interested but do not qualify. Set a date and time, an make this a dealership event (from the “assembly line” inspection process to evaluating sales opportunities);
• Now is a good time to introduce the use of weighted-cost averaging and aftermarket parts to both maintain your profit margins while providing a competitive price to the consumer.

Make lemonade out of lemons. Take control of the situation, and make a potential disappointment into a positive opportunity. Build trust and long-term relationships; the profit will follow.

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