Dealerships Can Take the Sting Out of Oncoming Recession

Posted by Insignia Group on Dec 1, 2022 10:03:38 AM


Economists differ on what’s coming next. One will argue that consumer spending is still strong, employment is still in an upward churn, and we’re just thawing out from the global freeze caused by the pandemic. Another will say an early 2023 recession is inevitable. 

Dealerships have to deal with future forecasts while simultaneously managing current challenges. Will high vehicle prices and low inventory give way to slowed demand?

Regardless of what awaits the automotive world in 2023, cars are an essential business and dealerships are notoriously resilient. 

“Despite the severity of any past downturn, markets have always recovered, and in many cases, they have seen a monster rebound.”

Here are three tips to take the sting out of an oncoming recession and overcome adversity like we always do. 

Preparing Your Dealership for the Recession

In a climate like we have right now, control what you can. Dealerships should put an emphasis on getting used cars back on their lot to increase inventory. With more used cars, dealers have the opportunity to get more people in and create customer loyalty.

 1. Trade-in Campaign

The pandemic created a low-mileage phenomenon. Shutdowns and working from home resulted in a plethora of older vehicles with an abnormally low number of miles. In a typical environment, cars peak in resale value at about three to four years old and around 30,000 miles.

Today, a car that is up to five years old can still be in three-year-old shape. That gives dealerships an opportunity to widen their reach. 

Pull a list of customers that bought from you three to five years ago, from your auto dealer software, and start a trade-in campaign. Offer your past customers the option to trade in their older car for a newer one, at or around the same monthly payment.

Once you get the customer in the store, you have further upsell opportunities. Did the customer start biking during the pandemic? Sell them a bike rack. Did your customer develop a love for road trips? Recommend all weather mats.

In the end, you have customer loyalty, a car sale, accessory sales, and a used car (at its highest resale value) back on your lot. 

2. Lease Campaign

Rising interest rates, low inventory, high prices, and uncertainty about the future of the economy prevent some consumers from buying a car. For some, a short-term commitment is more attractive. 

While the average lease is only 36 months, financing a car can stretch payments out over 64 months or more. 

Keep in mind, a lease campaign should be assigned to salespeople that are reliable with their follow-ups. Contact everyone at or near the end of their lease. A person who is about to be out of a car has a decision to make; purchase the vehicle or sign a new lease.

In either scenario, the dealership makes money and creates customer loyalty! 

To take it a step further, contact people that are in the middle of their lease and offer an early lease buy. An early buy gives your customer two options, both of which will be attractive to different groups of people.

One customer may be interested in driving a newer car at the same monthly rate for fun, luxury, or the thrill of a change. While another customer may be interested in lowering their monthly payment by bumping down to the base model.

The early lease buy will get the customer in the store, offering sales opportunities, as well as getting a used car back on your lot. Wash, rinse, repeat! 

3. Service Referral Campaign 

Most dealerships have a service bill threshold that will alert sales to an opportunity. If your dealership doesn’t have that in place, that’s step one!

Let’s say you use auto dealer software like CDK Drive or Dealtertrack DMS, to refer sales from service. Any service bill over $800 alerts sales to an opportunity. Going into 2023, consider slightly lowering the threshold (e.g., $650) to give yourself more opportunity.

When those alerts come in, sales can contact the customer to let them know the service bill reached a certain amount, and offer them options for a new car that is comparable to what they’re currently paying. 

Considering the first one to three years are maintenance, those alerts should be coming in for cars 3 years old and older, some of which will be at their highest resale value. 

Get to know the customer and find out what their current vehicle is lacking, then offer accessories on a new vehicle to solve the problem. Recession-proof your dealership by getting service customers into sales, offering accessories, and gaining additional used cars. 

Use the Accessory Sales Platform Everyone's Talking About

In any market, accessories are a surefire way to increase PNVR, generate higher CSI scores, add profit to fixed ops, and more.

Insignia Group has more than twenty years of experience helping dealerships sell accessories at the point of sale, and can help you navigate these campaigns too.

Whether your customer is in-store or online, the Insignia Group digital interface allows your customer to visualize personalization and roll the price of accessories into F&I. 

Our team of expert consultants will work with you to create a custom process, as well as, train your staff to talk to customers about personalization and utilizing the system.

Insignia Group is also partnered with many popular digital retailers to help dealerships syndicate their pricing and offer a fully personalization experience for online shoppers. 

Ready to get started? Contact us today to see how we can work together


Topics: Increase Profits, Dealership, Accessories sales, Gross profit