We often highlight at Motor Trade Insider the fact that the actual selling of a car is only a very small part of how the modern car dealer attempts to gain a profit and apart from the aftersales route and traditional finance packages there are now masses of products which can be sold as ‘bolt ons’ but which can easily make the whole transaction more profitable than simply selling the metal.
Gap Insurance, Service Plans, MOT Cover, Tyre / Alloy Wheel Cover, Vehicle Accessories, Paintwork Protection, Fabric Protection, Payment Protection, Insurance, Roadside Assistance and the list goes on.
The “beauty” of many of these products is that they give a perception of value much greater than they actually cost meaning they can obviously be extremely profitable.
There is no doubt that a lot of these products will make the ownership of a car more pleasurable in some cases and provide peace of mind in others.
There is nothing intrinsically wrong in offering value added products (even if that value is a perceived one only) but there must still be some semblance of reality and fairness in the price buyers are charged for these policies. Often the true cost of these add-ons is hidden in the monthly payment in a financed car and many buyers are shocked when this is pointed out to them at a later date, long after they have signed on the dotted line.
The need for “reality” and fairness of pricing is more crucial now than ever as, with information now at everyone’s fingertips, it doesn’t take much effort to discover the true cost to the retailer of these add-ons. It then comes down to a question of credibility and if the trade wants to move further away from the general perception of sharp practice then it needs to be very careful.
We have started to hear of cases recently where customers are being spooked out of the purchase of their next car ironically not because they are being pressured into buying the car, that is in some cases where the best deal is had and the buyer has hardly needed to haggle, but that the sales person has been very aggressive in pushing the add ons. This is because not only is he targeted and measured by the success in his up-sells but also having let the car go for a large discount he needs to ensure that the deal is still viable.
As far as the future profitability of the business is concerned having confused and bewildered customers, who just want to buy a car and have no real interest in any of the products offered, being made to feel stupid and inadequate by not signing up to them is commercial suicide.