RAC: maximise aftersales.

Car dealers need to concentrate on profitability per unit as the stock of available used cars in the two-to-three year-old age range starts to shrink: this means emphasising after-sales products and having a structured sales process in place, according to RAC Warranty, which offers specialist financial services to the motor trade.

The company believes that signs are appearing within the used car market of the impact of the sharp fall in new car sales seen since the start of the recession – resulting in fewer used cars of this age appearing at auction and through other sources.

Fewer used cars

RAC Warranty’s sales and marketing director Ian Simpson tells ModernSelling.com: ‘This is something that has really started to happen over the last few months. New car sales started to fall off in 2008 and, two years down the line, we are seeing an inevitable reduction in the number of cars of this age available.’

He says: ‘This has all kinds of effects on dealers. The choice facing them is reduced, prices are inevitably higher and, ultimately, it means that dealer will be selling fewer units, certainly in this kind of age range.’

RAC Warranty, a partnership set up between the Aviva-owned RAC and The Warranty Group in 2008, stresses that this shift means that dealers need to think hard about per unit profitability, maximising the return from each vehicle sold.

Explore profit potential of aftersales products

Simpson explains: ‘Dealers need to look at each vehicle, ensure that it is prepared thoroughly to make it as attractive as possible in order to justify the windscreen price, and ensure that the profit potential of aftersales products is fully explored.

‘Aftersales products are very much the key to maintaining overall levels of profitability when unit sales decline. Dealers need to ensure that they have a structured sales process in place covering everything from GAP (guaranteed asset protection) cover to warranty sales,’ he stresses.

Continued demand

Simpson adds that RAC Warranty is continuing to see customers buy upgraded warranties, indicating that many of the worries prompted by the recession were still very much being felt.

He says: ‘Used car buyers are still hearing bad economic news on a regular basis, even if it is improved from a year or so ago. They value the reassurance of safety net products such as warranties while they also remain an important source of profit for dealers.’

RAC Warranty offers a range of products for FSA (Financial Services Authority) compliant dealers including  parts and labour cover, GAP loan shortfall insurance, GAP return to invoice insurance, tyre insurance, MOT failure Insurance and lost keys Insurance. The company also offers RAC Service and Maintenance, which is not subject to FSA regulation and has been developed to ‘allow a large number of dealers to add significant benefits to their ongoing customer relationships’.

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