The Deeper Dive: Catering to the Keepers

Automakers have collectively spent tens of billions of dollars trying to concoct schemes sales campaigns that make consumers perpetual debtors instead of long-terms owners.

$129 a month. 0-percent financing. Move the decimal point here and the first payment there. Sprinkle a healthy amount of small print, toss in some advertising that pushes the right buttons, and keep driving down credit standards to the point where you maximize your long-term profits.

It takes the right financial recipe — and an awful lot of money — to keep any automaker in the black. The mathematical truth of the auto industry is that automakers can’t do anyone any favors, anywhere, if they don’t successfully cater to a healthy audience that embraces debt as a long-term financial proposition.

So with that said, how should automakers cater to the keepers among us? Those new car shoppers who buy once, and then try to keep their cars until they are often times worth more dead than alive?

This is one of the more challenging questions of the car business. You can try espousing reliability, quality, precision and a whole lot of other nice comforting words into the advertising of a given brand. One brand may try to represent themselves as “The Relentless Pursuit of Perfection” while another says that they are “Built Like No Other.”

Is this what a keeper really wants? Do they want a fortress of interminable longevity as their daily commuter? Or are many of them just as willing to try something nice for now and buy something else a few years later if the right opportunity comes around?

How do you get your keepers to become traders?

I see two unusual ideas that are beginning to chip away at the keeper mentality.

The Exchange: The typical idea of a car exchange has usually revolved around changing personal needs and tax avoidance. You exchange one vehicle that was bought at one stage of your life — say, a compact sports car that was bought at a time when you were single — for another one that’s a better fit for your next stage, such as a crossover to support a young family.

The other party can be a private seller or a dealer and, in most states, you’re able to avoid states taxes completely or minimize them by simply making the two vehicles comparable in value at the time of exchange.

High trade-in values for late-model cars is one common way of getting keepers into this habit of trading in their old cars for new ones. What used to be just a haphazard promotion devised by a local sales manager has now become a highly refined system of targeting specific consumers who have the right cars and trucks for this exchange. In the coming years, don’t be surprised if automakers and their dealer networks start to develop online exchanges that offer low ‘exchange’ prices which help sell new cars and bring in popular vehicles for their CPO programs.

The 200k Kit: Traditionally automakers have focused on provided extended warranties to those folks who want to keep their cars over the long haul. The issue for these warranties is that their lack of use can be seen as an intentional rip-off. Consumer Reports recently completed an extended study where they found “ 55 percent of owners who purchased an extended warranty hadn’t used it for repairs during the lifetime of the policy.” On average, those who did use it spent several hundreds more for the coverage than they saved in repair costs.

In a world where long-term reliability is becoming more of a given, maintenance needs may become the bigger issue for those customers who want to keep their cars for the long run. Why not offer an extended service contract that guarantees a blanket 25-percent discount for all the maintenance needs of a given vehicle up to 10 years or 200,000 miles?

Service contracts have been around for decades. This is nothing new. However, their importance for everyday consumers is evolving, and long-term care of a keeper’s car with OEM parts and dealer personnel can represent a better way to bring keepers closer to the brand in ways that an extended warranty simply can not do.

What are your thoughts? This business does not have easy answers and I have learned over the last 12 years as a car dealer and remarketing manager that ‘keepers’ can be your most challenging and least profitable customers. Many of them embrace six simple words when it comes to the automobile: “Don’t spend money. Don’t buy anything.”

Are these two ideas possible win/win scenarios? If so, what else would work?