Dealers will upsell warranties as used car stock becomes scarce – RAC

Less quality used cars and fewer sales will see dealers look to maximise profits.

Further shortages of quality used car stock throughout the first part of 2011 will see more dealers make further moves to concentrate on maximising aftersales profitability, predicts RAC Warranty.

The company says that it is already seeing signs that the remaining dealers who do not employ structured aftersales processes covering products such as warranties and service plans are working on putting them in place.

Ian Simpson, sales and marketing director, said: “This is really a continuation of an existing trend. Quality used car stock is in ever shorter supply and is subsequently becoming harder to obtain and ever more expensive. Ultimately, this means that used car dealers will have fewer cars to sell and they must maximise the profit from each unit.

“Many dealers, perhaps now the majority, have already put in place a structured sales process designed to make this happen but we have seen greater numbers follow this path in the last part of 2010 and into the New Year.”

Simpson explained that dealer thinking was to ensure that all parts of the aftersales portfolio were properly presented to the customer and their advantages fully explained as an integrated part of the used car sales process.

He said: “Traditionally, the majority of dealers have offered aftersales products almost as an afterthought. They sold the car and then cursorily took the customer through warranty and service plan options.

“That is no longer the case. More and more are ensuring that they have a properly structured and incentivised aftersales process in place and they are doing this because it is widely apparent that such processes produce results.”

Simpson said that where it worked with dealers on warranty and service plan processes, sales of these products often increased by around 30 per cent, increasing both dealer profitability and opportunities for customer retention.

He explained: “Treating aftersales products as a core part of the used car sales process is something that will be crucial in 2011 if dealers are to maximise profitability. The economic climate remains difficult and, because of this, customers are receptive to products such as warranties and service plans that help to insulate against unexpected costs.”